A "low interest" loan shouldn't mean you have very little interest in paying it back!
  • Home Loan BYTES FROM OUR KITCHEN

    Home Loan Guide for First Time Home Buyers

    If you’re one of the millennials, you’d know that owning a home has long since been the quintessential Indian dream. But in the 21st century, where an entire world’s economy hinges on a volatile stock market, buying one doesn’t come easy. If you are a first-time home buyer in particular, you need to be equipped with the know-hows of how a home loan works in the current scenario.

    While the internet is already rife with plenty of guides to help you through a home loan process, the ones available simply aren’t effective enough as they don’t cover all the bases. However, you can count on this page to give you all the information you need. From the mundane to the magnificent, you will learn all that you need to about a home loan.

    So, let’s begin with the essentials.

    Home Loan: What is it?

    A Home Loan is basically a form of financial reinforcement availed of to fund the purchase or construction of a house. In the present times, a home loan can also be used to refinance an already existing home loan or simply reimburse the cost of buying a second-hand property.

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    Home Loan and Its Basic Types:

    There are several different types of home loans, depending on the purpose they are used for. Some of the most commonly seen ones are:

    • Home Purchase Loans

      Home purchase loans are, by far, the most popular types of home loans in India. This is where an individual uses the disbursed loan amount to purchase a newly built apartment or an already constructed property. Nearly every bank and financial institution in India offers this type of loan. Each of the banks, however, follow their own interest rate policy and loan terms.

    • Land Purchase Loans

      Land purchase loans, as the name suggests, are used to fund the purchase of a land where an individual is planning to construct their home. Lenders usually provide a maximum of 85%-90% of its cost, while the other 15% should be put together by the applicant.

      All the major banks and NBFCs like HDFC Bank, Axis Bank, Punjab National Bank, and DHFL among many other offer land purchase loans, albeit under a different names.

    • Home Construction Loans

      These type of loan is available for individuals who are planning to build a house of their own land. The application and approval process to avail this loan though is a little tricky. Take for example, if the individual wants the cost of land to be included as a component for the total price of the house, they must have bought the property within the previous year.

      Again, every major bank in India like HDFC, Axis, State Bank of India, Canara Bank, UCO Bank et al offer this type of loan.

    • Home Improvement Loans

      Home improvement loans are taken by individuals who are unable to mobilise enough funds to renovate the house they are living in. The maximum home improvement loan an individual is eligible for depends entirely on their debt-to-income ratio and their financial standing.

    What Is The Eligibility Criteria for a Home Loan?

    All banks and NBFCs in India have their own eligibility criteria a prospective home loan buyer has to meet. Here’s a list of the primary requirements.

    1. You need to be aged between 18 and 60 years.
    2. You need to be a salaried or a self-employed individual with a steady income.
    3. You need to earn more than the minimum income quoted by the banks.

    These three aspects qualify you for a loan. However, there are a few other factors on which your application hinges. They are:

    1. Your monthly income: When you apply for a home loan with any lender, you need to prove to them that you have at least 50% of your income ready to serve the EMIs.
    2. Other loan commitments: Having a high monthly income doesn’t necessarily guarantee you a home loan. Also, if you are in the pursuit of repaying any other loans, the total loan amount you’ll be eligible for will significantly decrease. This is why you need to make sure to clear every other loan commitment before applying for a home loan.
    3. Your down payment capability: A lender never gives out the entire loan amount you’ve applied for. In fact, the most they will give you is 80% of the value of the property. The other 20% funds should be mobilised by you. If you are applying for a new home loan, you should make sure to have the down payment fund ready so that your application doesn’t get rejected.

    What are The Documents Required to Apply for a Home Loan?

    Every home loan provider more or less follow the same documentation process before signing off on the loan application. Here are a list of documents you need to keep ready when you decide to take a home loan.

    1. Fully filled and signed application form along with a photograph.
    2. Identification proof and residence proof: For ID proof you can provide anything like your PAN Card and for residence proof, you need to provide a copy of your passport/driving license or any of the latest utility bill.
    3. Cheque for the processing fee.
    4. Bank statements of the previous 6 months.

    Besides these, there are also a few other documents you need to provide depending on whether you are a salaried or a self-employed professional.

    Salaried professionals need to provide their pay-slips for the last three months along with their Form 16 or Income Tax Returns (ITR) filing.

    Self-employed professionals, on the other hand, need to provide proof of education qualification certificate and proof of their business’ existence. Apart from this they need to provide proof of ITR for the previous three years which should also include the computation of income. Lastly, they need to provide a CA audited/certified balance sheet and profit-loss account for the previous three years.

    What are The Different Types of Home Loan Interest Rates in India?

    Before we head into home loan interest rates in India, let’s first ascertain how a rate is fixed. An interest rate on a home loan is dependent on two policies: Marginal Cost of Lending Rates (MCLR).

    MCLR policy is a policy brought into effect by the Reserve Bank of India (RBI) from April 2016 in place of Repo Rate policy. It plays a featuring role in determining the home loan lending rates set by financial institutions. Under this policy, banks need to fix a base rate based on their cost of running business based on which which they can quote an interest rate as per the borrower’s risk factor.

    If RBI increases or decreases the repo rate significantly, banks and financial institutions need to follow suit to correct the base rate as per guidelines.

    Now, that the basics of how an interest rate is set is ascertained. Let’s talk about the different types of interest rates available in India, of which they are two.

    1. Fixed Interest Rate Home Loan:

      A fixed interest rate home loan is a type of home loan rate, wherein the interest rate is fixed for the entire tenure of the loan. This means that the interest rates aren’t likely to change even if there are significant changes in the economic market. Under this type of loan, a major component of EMIs in the beginning go into servicing the interest while the principal repayment only comes in the latter half.

      Some of the advantages and disadvantages of Fixed Interest Rate Home Loan include:

      Advantages Disadvantages
      Interest rate stays the same through the tenure, which brings a level of certainty for the borrower. These loans usually workout a good 1%-2.5% more than floating rate loans.
      Helpful for good budgeters as it comes with a fixed monthly repayment schedule. Borrowers cannot take the advantage of an interest rate cuts during their loan tenure.
    2. Floating Interest Rate Home Loan:

      A floating interest rate home loan is a home loan where in the rate of interest varies according to the market conditions. This means that interest can either go up or down depending on how the market is performing.

      Some of the advantages of floating interest rate home loan include:

      Advantages Disadvantages
      Comparatively cheaper than fixed interest rate home loans, as long as the market remains stable. Market is volatile and any unexpected downturn can increase the interest rates and in turn EMIs significantly.
      This type of loan is cyclical as interest go up and come down often. This helps a borrower save a considerable sum on interest paid. If the rate goes beyond 11.5% or so, this type of loan can become an expensive burden for the borrower.

    Things That Affect Your Home Loan Application and Approval Process

    There are plenty of factors that will have a bearing on how your loan application fares with a a lender you have chosen to apply with. They are:

    1. Age
    2. Income bracket
    3. Property type and its location
    4. Market value of the property

    After you submit the required documentation to the lender, they will thoroughly vet the details you’ve provided to ensure that they check out. Depending on their findings, you will be offered a loan deal. One important thing you should understand here is that their findings will be directly proportional to the term and conditions you get.

    What Are The Home Loan Deals Offered By Some of The Leading Banks?

    Here are some of the best home loan deals offered by some of the leading banks in the country.

    • State Bank of India:

      SBI, one of the largest banks in the world, currently offers a floating rate home loan deal with a base rate of 9.75% per annum. The lending rates, however, are slightly higher. For a loan of up to Rs. 30 lakhs, the interest rate stands at 0.25% above the base rate, effective bringing the overall interest to 10%. For loans above Rs. 30 lakhs, the rate stands at 0.40% above the base rate, which brings the rate to 10.15%. The maximum tenure SBI offers goes up to 30 years.

    • HDFC Bank

      HDFC Bank, one of the largest financial institutions in India with regards to market capital to market capitalization also has an extensive home loan offering. The bank uses the Retail Prime Lending Rate (RPLR) - Spread formula to determine the interest rate, where in RPLR is the minimum rate at which the it lends and spread is discount or markup offered on the loan.

      It basically offers 3 different variants of home loans. They are:

      1. Called the Adjustable Rate Loan, this loan offers any amount at a rate that goes between 9.45%-9.95%. Here’s a table that lists the rates.
        Loan Amount Interest Rate (p.a.) RPLR - Spread
        For Women* (Any Loan Amount) 9.40 to 9.90 RPLR - (6.90 to 6.40)
        Any Loan Amount 9.45 to 9.95 RPLR - (6.95- 6.45
      2. Known as the TruFixed Loan, this loan comes with 2 and 3 year fixed rate variant. In this case too, the bank is ready to offer any loan amount.
        Loan Amount Interest Rate during 2nd and 3rd year of fixed rate term (p.a.) Interest rate after the end of fixed rate term
        For Women* (Any Loan Amount) 9.50 to 10.00 RPLR - (6.80 to 6.30)
        Any Loan Amount 9.55 to 10.05 RPLR - (6.75- 6.25)
      3. This is yet another offering, known again as TruFixed Loan, is available for 10 year fixed variants.
        Loan Amount Interest Rate after the 10 year fixed rate term (p.a.) Interest rate after the end of fixed rate term
        For Women* (Any Loan Amount) 9.70 to 10.20 RPLR - (6.60 to 6.10)
        Any Loan Amount 9.75 to 10.25 RPLR - (6.55- 6.05)
    • ICICI Bank:

      ICICI Bank, also among the leading banks in the country is offering a good home loan deal too. Here’s are a few tables that list out ICICI bank’s offering for salaried and self-employed individuals.

      For all intents and purposes I-MCLR- 1Y is the home loan benchmark set by the bank.

      1. Fixed Interest Rate for full tenure:
        Loan Amount Effective Rate of Interest (p.a.)
        Upto Rs. 30 lakh 9.75%
        Above Rs. 30 lakh 9.85%-10.10%
      2. Floating Interest Rate Loan:
        Loan Amount Effective Rate of Interest (p.a.) Rate
        Upto Rs. 5 crores 9.45% I-MCLR-0.30%
        Above Rs. 5 crores 9.75% I-MCLR-0.55%
      3. Fixed Interest Rate for 2,3 years:
        Loan Amount Fixed rate for 24/36 months Floating rate from 25th/37th month
        Upto Rs. 5 crores 9.35% I-MCLR-1Y +0.35%
        Above Rs. 5 crores 9.70% I-MCLR-1Y + 0.60%
      4. Fixed Interest Rate for 5,10 years:
        Loan Amount Fixed rate for 60/120 months Floating rate from 61st/120th month
        Upto Rs. 30 lakhs 9.45% I-MCLR-1Y +0.35%
        Above Rs. 30 lakhs 9.55%- 9.80% I-MCLR-1Y + (0.45% to 0.70%)

    What Are The Things You Should Keep in Mind Before Applying For a Home Loan?

    A home loan can be a massive burden if you don’t consider all the details that go into it. Here are a few things you should keep in mind before applying for one.

    1. Your Borrowing Capacity:

      You shouldn’t opt for a higher loan amount just because you draw a bigger paycheck. Before applying for a home loan, you should carefully understand your borrowing capability. But, how can one exactly find out the loan amount they are eligible for? It’s fairly simple.

      First things first, you need to keep in mind all the expenses you incur in a month. These may include your regular household expenses, travel, kids’ fees, utility bills, pending loan payments, and miscellaneous expenses. Once you’ve listed down all these expenses, the amount you are left with is what you can use to make the EMI payments on the home loan.

    2. Credit Score:

      You may not feel the importance of credit scores all that much, but it is the most crucial determinant of the interest rate you are likely to get. For a good home loan rate, you will need to maintain a credit score of 750 or above. Having a score such as this would endear a lender to you as they are less likely to be a liability for them. This will also help you get an interest rate which is a which basis points lower that what they officially claim.

    3. Loan Tenure:

      Home loans can often go on for over 20 years, and up to 30 years, in the case of SBI. Analyse the loan tenure you’ve been offered and see if the tenure works out for you. If you think you need more room, negotiate a better term with the bank or reduce the total loan amount you have applied for instead.

    4. The Terms and Conditions of The Loan:

      The terms and conditions you sign when borrowing a home loan is legally binding, which suggest that you have read all the terms and conditions laid out by the bank and comply with the offer. What you may not know, however, is that this is also one of the places where lenders tend to add draconian clauses and enforce them. So, avoid falling into such rabbit holes and make sure to go through all the clauses and sub clauses mentioned in the loan agreement before signing on the dotted lines.

      In the current market, purchasing a home is nothing short of an achievement. To make the best out of the situation always make sure to take a well-informed decision.

    Home Loan Guide for First Time Home Buyers Reviews

    • DHFL Home Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I have a home loan with DHFL INSTITUTION . I got option of preclosere and it is very nominal . The process to get the loan is fine. The rate of interest is fine even processing fee nominal . The loan was provide on time and the documentation was collected on time too. I received the loan amount as expected.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 18, 2019
    • ICICI Bank Home Loan
      "Useful for private employee people"
      0.5 4.0/5 "Great!"
      In 2006, I have taken my housing loan with ICICI Bank. During that time, they have assured me a lower interest rate hence i have chosen them. After 1 year, they have increase the interest rate which is higher than other bank hence i have done the pre-closure. Processing fee and interest rates were very high.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 18, 2019
    • Bank of Baroda Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      The experience i had with this loan has been quite good where the process was very simple and smooth. The loan amount which they had provided has been sufficient and the interest rate which they offered me was very less when compared with the market rate. The charges which they had made has been nominal as well.
      Was this review helpful? 0
      , navi mumbai
      Reviewed on Jan 18, 2019
    • Indiabulls Home Loan
      "Good loan services"
      0.5 4.0/5 "Great!"
      In March 2018, I have applied the home loan with India bulls. My friend has recommended about the indiabulls loan. They have given me a interest rate of 8.35% and I'm happy with it. I have received the loan in 20 days. I have no idea about the processing fee. Total tenure period the loan is 20 years. I am making the EMI through ECS.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jan 18, 2019
    • Canara Bank Home Loan
      "Very Good Service"
      0.5 4.0/5 "Great!"
      It was quite a good experience with this home loan, the interest rate with them was a little high initially but it has been reduced afterwards. There has not been any hidden charges which they had made and the processing fee has been very nominal. Their customer support has been excellent in guiding in everything.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 18, 2019
    • SBI Home Loan
      "Good in Service"
      0.5 3.0/5 "Satisfactory"
      When i was looking for a home loan, I had applied with with SBI . When i had submitted the documents , my application was taken care and it was processed. There was no delay and processing was on time. Interest rates are reasonable compare to the market value.
      Was this review helpful? 0
      , secunderabad
      Reviewed on Jan 18, 2019
    • LIC Housing Home Loan
      "Interest rate should be flexible"
      0.5 4.0/5 "Great!"
      LIC housing is providing good interest for home loan, but when govt reversed the rate of interest, I got higher percentage and they have taken some processing fee from the disbursement. But they didn't give any insurance. Anyway LIC housing has balance transfer, part payment and foreclosure option.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 18, 2019
    • SBI Home Loan
      "Best financial service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan from State bank of India where i have transfered the loan from other bank . Where they are giving satisfying rate of interest . There is nominal charges for the processing fees for the documentation . Am pretty much satisfied with the rate of interest which they have provided.
      Was this review helpful? 1
      , pune
      Reviewed on Jan 18, 2019
    • Kotak Home Loan
      "Best financial service "
      0.5 5.0/5 "Blown Away!"
      I have taken Housing loan from the Kotak mahindra bank , They have given Fair rate of interest based on the market price . They did instant approval process as fast as they can do . . There is no nominal processing fees as every bank i used to charge which is minimal .Overall am satisfied with the financial service .
      Was this review helpful? 0
      , pune
      Reviewed on Jan 18, 2019
    • Axis Bank Home Loan
      "Right bank to fulfill your dream home"
      0.5 3.0/5 "Satisfactory"
      Last August i have purchased my home loan from Axis Bank. Since the rate of interest is less and I'm existing customer of Axis bank for last 11 years hence i have chosen them. Processing fee was nominal. I have applied the loan amount of Rs. 22 lakhs which is sanctioned bit delayed.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 18, 2019
    • SBI Home Loan
      "Very Good Service"
      0.5 4.5/5 "Excellent!"
      It was quite a good experience with them, where the loan amount which they had provided has been sufficient, the service charges where nominal. The interest rate with them has been less when compared to other banks. There has not been any charges additionally and the customer support of them has been helpful as well.
      Was this review helpful? 0
      , chennai
      Reviewed on Jan 18, 2019
    • SBI Home Loan
      "Good Financial service"
      0.5 4.5/5 "Excellent!"
      Rate of interest is bit low compared to other bank they have given best rate of interest am fully satisfied with it , They took time like 1 month for the processing and approval for the documentation as they do property evaluation . . They have charges some nominal fees for the housing loan approval Am pretty much satisfied with the customer service .
      Was this review helpful? 1
      , kochi
      Reviewed on Jan 18, 2019
    • Citibank Home Loan
      "Can do better"
      0.5 3.0/5 "Satisfactory"
      Ten years back I took home loan from Citi Bank at that time, the interest is higher and I done lots of documentation. CITI bank deal is not good, I done the foreclosure but I didn't pay any extra fee. They do have balance transfer, part and foreclosure options.
      Was this review helpful? 0
      , chennai
      Reviewed on Jan 18, 2019
    • Bajaj Finserv Home Loan
      "Bajaj Finance / Fineserv are CHEATERS"
      0.5 0.5/5 "Unacceptable"
      Bajaj Finserv and finance makes false promises and then cheat the customer. They should be punished for doing it. They are terribly horrible. Don't go for any products or loans from Bajaj, they will certainly cheat you in some way and won't care about you once they have collected their fees and start increasing interest. Customer feels helpless and frustrated.
      Was this review helpful? 1
      , pune
      Reviewed on Jan 18, 2019
    • ICICI Bank Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have been using my home loan with ICICI bank,they have given me sufficient loan amount,and the rate of interest they have charged me up to 8.9% it is not fixed,it varies according to market rate, and they have not charged me processing fee as it is zero processing fee, and the loan is still running,overall service is good.
      Was this review helpful? 2
      , new delhi
      Reviewed on Jan 17, 2019
    • IDBI Home Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have been using my housing loan with IDBI bank, they have given me sufficient loan amount, and the rate of interest they have charged me up to 8.45% which was nominal for me, and the processing fee they have charged me was nominal, and still my loan is running,till now i had good experience.
      Was this review helpful? 1
      , mumbai
      Reviewed on Jan 17, 2019
    • SBI Home Loan
      "Best service"
      0.5 5.0/5 "Blown Away!"
      I had taken my housing loan with State bank of India, the loan amount they have given me was sufficient but was below to my expectation ,was okay for me , and the rate of interest they have charged me was nominal,and the processing fee they have charged me was very nominal,there overall service was good, now my loan got closed.
      Was this review helpful? 2
      , chennai
      Reviewed on Jan 17, 2019
    • Bank of India Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I have been using my housing loan with Bank of India, there service was good ,they have given me sufficient loan amount, and the rate of interest they have given me was up to 8.5% now,the rate of interest is not fixed it use to fluctuate according to market price, and the processing fee they have charged me was nominal,there mobile application and net bank is good, there application is user-friendly,but if i took loan from Hyderabad bank but i am in Bangalore branch then they will not help me out in this only on that bank they will be helping out if i had any issue or query.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 17, 2019
    • Bank Bazaar Home Loan
      "It was a good experince and very easy to reach them and talk"
      0.5 3.5/5 "Pretty good"
      I feel very good. Bank Bazaar approve my loan. I got a call from Bank Bazaar customer service. They will help me provide me loan. Customer service agent also very polite and well behaved. I think this Company provide very good service and they help people a lot. It was a good experience and very easy to reach them and talk them and also you can easily apply their staff is also very good.
      Was this review helpful? 2
      , delhi
      Reviewed on Jan 16, 2019
    • SBI Home Loan
      "Good Experience for Housing loan"
      0.5 4.0/5 "Great!"
      SBI is best for the home loan, they come down to 9% of interest its good compared to private sectors. The documentation verification is very easy and very secured as well. Even the bank gave me balance transfer, pre closure, part closure options.
      Was this review helpful? 4
      , mumbai
      Reviewed on Jan 14, 2019
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