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Home Loan Interest Rate 2022

Home Loan Interest Rate and Processing Charges

✓ Home Loan from ₹2 Lakhs To ₹15 Cr ✓ Multiple Lending Partners ✓ Interest Rates Starting @ 8.25%

 

Currently Home Loan Interest Rate starts at 8.25% p.a. for individuals with CIBIL Score of 800 or more. Get the list of top banks and financial institutions that are providing the lowest housing loan interest rate in India at Bajaj Markets and apply for House Loan Online.

Current Home Loan Interest Rates - Compare and Apply

Below is a list of the current housing loan interest rates and charges 2022 for all leading banks of India:

Lender

Minimum Interest Rate

Processing Fee

Bajaj Housing Finance Limited

8.30% p.a.

Up to 7% of the loan amount

PNB Housing Finance

8.25% p.a.

Up to 0.50% + GST

Union Bank of India Limited

8.25% p.a.

0.50% of the loan amount or Rs. 15000/- (whichever is higher) + applicable GST

ICICI Bank

8.40% p.a.

Up to 2% of the loan amount or Rs.1,500 whichever is higher

LIC Housing Finance

8.30% p.a.

Up to 0.50% of the loan amount + GST

Home First Finance Company (HFFC) Limited

9.50% p.a.

1.50% + GST onwards

Shubham Housing Finance

11.90% p.a.

Rs.1,500/- + 3% of the loan amount

 Interest rates and processing charges are subject to change as per the change in the financial institution’s terms and policies

Types of Home Loan Interest Rates

As of now, three kinds of interest rates exist in the lending market, namely fixed, floating and hybrid rates of interest.

 

  • Fixed Home Loan Interest Rate: It is a predetermined borrowing rate that does not change at any given point during the loan repayment tenure. This form of interest rate paves the path for an easy calculation of the total Home Loan dues that a borrower is supposed to repay.

  • Floating Home Loan Interest Rate: It keeps varying and is revised periodically. Hence, computation of the Home Loan due amount with a Floating Housing Loan Interest Rate is somehow difficult, given that one cannot always accurately predict the changes that the Indian economy will undergo in the future.

  • Hybrid Home Loan Interest Rate: Certain home loans have a mixed interest rate. These loans are initially fixed rate loans for a certain predefined period of time and then become floating rate loans. You can choose such loans if you are getting a low fixed interest rate but plan to foreclose in the future once they convert into floating rate loans. This is because, as per RBI guidelines, no foreclosure charges are applicable on floating rate loans.

Which is better - fixed interest rate or floating interest rate?

When compared, floating interest rates are cheaper. The floating rate continues to fluctuate as per the market trends. The fixed interest rate is usually 1% to 2% higher. Know the Difference here and Choose b/w Fixed vs Floating Interest Rate

How to Calculate Home Loan Interest Rate

You can calculate your due on House Loan interest amount after determining the rate of borrowing and the principal sum that the lender is giving you. Below mentioned are 3 different methods by which you can calculate your home loan interest:

 

  • Home Loan Interest Rate using Formula: This process requires manual calculation with formula: EMI = [P x R x (1+R)^N]/[(1+R)^N-1]. Where, EMI is Equated Monthly Installment, P is the principal amount, R is the monthly rate of interest, and N is the loan repayment tenure (in months)

  • Home Loan Interest Rate using Microsoft Excel: This calculation requires MS Excel via “PMT function”, with Formula: PMT(RATE, NPER, PV, FV, TYPE). Where,‘RATE’ is the interest rate that the bank is willing to lend a Home Loan at, divided by 12, ‘NPER’ is essentially the number of EMIs, and ‘PV’ is the total principal amount. Additionally, it must be noted that both ‘FV’ and ‘TYPE’ should have the value set to 0.

  • Home Loan Interest Rate using EMI Calculator: Using an House Loan EMI Calculator is the easiest option to calculate the Interest Rate. User has to fill the ‘Loan Amount’ field, applicable interest rate and choose the repayment tenure. Last, Click on the ‘Calculate’ button in order to get your results. Check Interest rate at Bajaj Markets Housing Loan EMI Calculator to get the appropriate results.

Factors affecting Home Loan Interest Rate

Factors that have a direct impact on the Home Loan Interest Rates are as follows: 

 

  • Type of Interest Rate: One can avail a Home Loan at any of the three types of interest rates. They can either be fixed, floating, or mixed in nature. While fixed rates remain constant throughout the tenure of repayment, floating rates are affected by the changes in the policy rates introduced by the RBI. Thus, one can say that if they choose to go for a type of interest rate that changes due to extraneous factors, they may be subjected to varying rates of interest over the course of the loan repayment tenure.

  • Benchmark Rate of Lending: Benchmark lending rates can either be the Marginal Cost of Funds-based Lending Rate (MCLR) or the Repo-Linked Lending Rate (RLLR). Financial institutions tend to decide a reset period for MCLR for durations such as 3 months, 6 months, 1 or 2 years throughout the home loan tenure and interest rate levy accordingly. RLLR is directly linked to the RBI’s repo rate and can change almost every quarter.

  • Loan to Value Ratio or LTV Ratio: It is the maximum loan amount a lender is willing to extend to Home Loan applicants, which is expressed as a percentage of the property’s market value at the time. Although a high LTV ratio brings in suitable financing value, it also translates into a higher chance that the borrower will default. Thus, banking institutions that offer a high LTV ratio also charge higher rates of interest.

  • Tenure of Repayment: The tenure of home loan repayment is directly linked to the risk of lending to the financial institutions and at the time of extending this money in advance. A borrower’s Housing Loan Interest Rate is set to be higher if they are repaying the same over a long period of time, while the loans that are set to be repaid over a shorter span of time attract lower interest rates.

  • RBI Policies: Any changes in the policies drafted by the Reserve Bank of India (or RBI) will bring about a change in the rate of interest on your home loan. The recent introduction of the Marginal Cost of Funds Based Lending Rate (MCLR) system, for example, allows you to set a date on which your interest rate will be reset. With this, you can benefit from any drop in interest rates. Learn more about Home Loan RBI policies.

How to get a lowest Home loan Interest Rate?

Some of the ways in which you can get a home loan at a low interest rate are:

 

  • Improve your credit score: Your credit score is a three digit numerical representation of your creditworthiness that stays within the range of 300-900. The higher your credit score is, the better are your chances of being approved for a home loan with the lower interest rate. If your credit score is more than 750, you can get a home loan at a fairly low interest rate.

  • Improve your income and employment situation: Another thing that determines your home loan interest rate is your annual income and the reputation of your employer in the sector it operates in. The higher your income will be, the more confidence a lender will have in your repayment ability, and this confidence can translate into low interest rates for you. So, to get a home loan at low interest rates, you can always improve your income by securing annual increments and working towards promotions. Alternatively, you can even consider switching a company and joining a more reputed firm to stand a chance of securing a home loan at low interest rates.

  • Go for a low home loan amount: The size of your home loan amount also determines the interest rate applicable to you. A high loan amount would translate into a high home loan interest rate for you and vice-versa. So, if you want to reduce the interest burden, you can always consider going for a relatively inexpensive home or making a large down payment to reduce your borrowed principal amount.

  • Get a Joint Home Loan: If you want to secure a home loan at a low interest rate, consider applying for a joint home loan and make your working wife the primary borrower. You must consider doing so because women get concessions on home loan interest rates of anywhere between 0.05-0.1%.

  • Go for a Floating Interest Rate Home Loan: The interest rate applicable on your home loan would either be calculated as per the fixed or the floating interest rate system. If you go for a floating interest rate home loan, your home loan interest rate will fluctuate depending upon the rise or fall of the repo rate. Hence, if you want to secure a home loan at a low interest rate, consider educating yourself about the two such home loan interest rates and choose accordingly.

Check How much home loan can I get based on my salary?

Other Banks Home Loan Interest Rates

Below is a list of the current home loan interest rate of all banks of India:

Lender

Minimum Interest Rate

Processing Fee

HDFC Home Loan

7.55% p.a.

Up to 0.50% of the loan amount or ₹3,000 whichever is higher, plus applicable taxes

SBI Home Loan

7.55% p.a.

0.35% plus Service Tax (Minimum Rs. 2000, Maximum Rs. 10,000)

Axis Bank Home Loan

7.60% p.a.

Upto 1% of the loan amount

IDFC Home Loan

7.50% p.a.

Upto 1% of the loan amount

Bank of Baroda Home Loan

7.45% p.a.

Upto 50 Lacs, 0.50% process fee of Loan amt.

Above 50 Lacs, 0.25% process fee of Loan amt.

Kotak Home Loan

7.50% p.a.

0.5% (plus taxes and any other applicable statutory dues) of loan amount

Canara Bank Home Loan

7.40% p.a.

Up to 0.50% (Max. Rs.10,000)

Home Loan Interest Rate FAQs

  • ✔️What is a Home Loan Interest Rate?

    Housing Loan Interest Rate is the percentage of the principal amount that is charged by the lender to the borrower for using the financial resources of the bank that has lent the same to them. These are charged by banks and non-banking-financial institutions as a price for acquiring a house loan. So, when you are paying your Home Loan EMIs (equated monthly installments), the rate of interest that is being charged determines how much an individual will need to pay their lender against their loan each and every month. Interest rates are typically linked to the Reserve Bank of India’s repo rate and it can vary from lender to lender.

  • ✔️How to calculate the interest rate?

    A Home Loan interest rate essentially has two components: the base rate and the mark-up rate. While paying your Home Loan interest dues, you will be paying a combination of these two variables, i.e Effective Interest Rate (EIR) = Base Rate + Markup

    • Base Rate: The standard lending rate that is levied against all retail loans is known as the base rate. This section of the Housing Loan Interest Rate keeps varying and is dependent on factors specifically pertaining to the lending institution.

    • Mark-up Rate: It is the percentage that is added against the base rate to arrive at the effective interest rate. As the name suggests, this addition to the base Home Loan Interest Rate is the profit mark-up of the lending institution in question. This rate differs for each type of loan.
  • ✔️How to reduce Home Loan Interest Rates?

    There are several ways by which you can reduce your Home Loan Interest Rates. Some of those are:

    • Enhance your credit rating and score by exhibiting healthy credit behavior and paying off your loans on a timely basis.

    • Apply for government-run housing schemes such as Pradhan Mantri Aawas Yojana (PMAY).

    • Avail for a Home Loan Balance Transfer Facility and take advantage of some of the most competitive lending rates in the industry.

    • Prepay With a Lump Sum Amount is also a facility that one can make use of in order to bring down the overall home loan interest burden

    • Opt for a Shorter Loan Repayment tenure

    • Request Annual Revisions of EMI

  • ✔️How is home loan risk weighting linked to loan-to-value (LTV) Ratio?

    Typically, a higher loan-to-value (LTV) ratio indicates that a majority of the house purchase is funded by the loan amount, which does not paint a favorable picture of the borrower. Ergo, if LTV is high, it is riskier to give the individual a home loan.

  • ✔️How can I check total interest payout for my Housing Loan?

    You can refer to the Loan Amortization Schedule shared with you at the time of Housing Loan approval. In order to know the exact amount you are paying as interest towards your Home Loan, you can also take the agreed-upon rate of interest (expressed in % terms) and multiply it with your principal amount in order to get the result.

  • ✔️Is the Home Loan rate of interest different for women?

    Several lending institutions offer women home loans at favorable rates of interest. Usually, the difference between the Housing Loan interest rate given to a working woman and that of a Home Loan given to men is somewhere between 0.5%-1% p.a. that will depend upon the lending institutions.

Latest Home Loan News

Home loan interest rate to remain at multi-year low as RBI keeps repo rate unchanged

During the Monetary Policy Committee’s meeting in February 2022, the Reserve Bank of India (RBI) announced its decision to keep the policy rates untouched – the repo rate stays at 4%, and the reverse-repo rate at 3.35%.

The repo rate refers to the rate charged to banks when they borrow from the apex bank, and the reverse-repo rate refers to the interest rates earned by banks when they store reserves with the apex bank. Both have a direct correlation with home loan rates in India.

As per an RBI mandate in 2019, banks in India can offer auto and home loans only when measured against an external yardstick – in this case, the repo rate. A bank’s ability to furnish new home loans is linked to the bank in question’s Repo Linked Lending Rate (RLLR). Any revision in the repo rate thus affects the bank’s RLLR, while reflecting a slower interest rate revision in the bank’s Marginal Cost of Funds based Lending Rate (MCLR) – a mandate introduced by the RBI in 2016.

This stagnancy in rates implies that those with home and auto loan EMI obligations will still pay the same interest rate, with experts suggesting that a conducive interest rate market (at a multi-year low) making this the right time to apply for a home loan.

Those who secured a loan before 1st October 2019 can continue with their MCLR linked loans or transfer it to RLLR but must do so after much research and caution.

- Feb 11, 2022