HDFC Bank has implemented the MCLR formula for its interest rate calculation, where rate changes are seen at a regular time interval. Here’s all the key fees and charges related to HDFC Home Loans:
- At present, HDFC Bank’s home loan interest rate ranges between 8.80% - 9.05%.
- Processing fee is 0.50% of the loan amount or Rs.11,800, whichever is lower.
- Loan tenure for a HDFC Home Loan is between 1 year to 30 years.
- There are no prepayment or part payment charges on a HDFC Home Loan and it doesn’t require any guarantor for a person to avail the loan.
ICICI Bank has updated its fees and charges for its home loan borrowers. You will find all the key details mentioned below:
- ICICI Bank has a different interest rate for general and female borrowers. For general borrowers, the interest rate goes from 8.90% - 9.10%.
- For female borrowers, home loan interest rates range between 8.85% - 9.05% .
- Processing fee for an ICICI Bank Home Loan will be the lower of 0.50% of the loan amount or Rs.11,800.
- An ICICI Bank Home Loan comes with a minimum and maximum tenure of 3 years and 30 years respectively.
- Home loan from ICICI Bank doesn’t come with any prepayment or part-payment charges and neither does it require any guarantor.
Axis Bank, one of the largest private financial institutions in the country, rejigged its home loan interest rate offerings. Here’s what the updated rates look like:
- The rates go between 8.75% to 10% interest rate for general borrowers.
- Interest rate for the Super Saver Scheme is set at 9.25%.
- Processing fees for an Axis Bank Home Loan will either be 0.5% of the loan amount or Rs.10,000, whichever is lower. Note that GST is applicable on the fee as well.
- For general home loan borrowers, tenure ranges from 1 year to 30 years. For Super Save Scheme loan borrowers, the maximum tenure offered is 20 years.
- Axis Bank doesn’t charge any prepayment or part-payment penalties on its home loans.
- No guarantor is required to avail an Axis Bank Home Loan.
PNB Housing Finance released its latest interest rate offering on its Home Loan products. The updated rate is as follows:
- Interest rates range from 9.0% - 9.50% for all PNB Housing Finance Home Loan borrowers.
- This is one of the few financial institutions which doesn’t require any processing charges.
- Loan tenure for a PNB Housing Finance Loan ranges between 1 year to 30 years.
- A PNB Housing Finance Home Loan doesn’t require any guarantors
- PNB Housing Finance doesn’t charge any prepayment or part-payment penalties.
Seeing as how several leading banks changed their home loan interest rates, IndiaBulls took updated its lending rates. Here’s what the latest edition looks like:
- Women borrowers get a slight leeway as interest rates for them ranges between 8.70% - 10.95%.
- The company’s fixed interest rate home loans come with interest rates between 9.25% - 11.20%.
- Processing fee for an IndiaBulls Home Loan is up to 0.50% of the borrowed amount.
- Loan tenure for an IndiaBulls Home Loan ranges from 1 year to 30 years to suit the borrowers’ convenience.
- IndiaBulls doesn’t charge any prepayment or part-prepayment charges and doesn’t require a guarantor to provide a loan to a customer.
TATA Capital, one of the recent entrants into the home loan market also changed the interest rates recently. The new interest rates are as follows:
- Interest rates range from 8.75% to 8.85%.
- Home loan borrowers can choose a maximum tenure of 30 years.
- Prepayment charge of 2% of the loan amount will be levied on a borrower if he/she choose to close their loan ahead of the term chosen.
Steps to Reduce Interest Rate on Home Loan
Certain measures can definitely help you to effectively reduce your home loan interest rate. These measure are mentioned below:
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Set EMI Targets: Make sure that you pay more than the regular Emi amount every year. This will surely help you to clear the loan faster.
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Increase EMI: Boost your EMI payments whenever you get a hike in salary or have some extra income.
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Refinance the Home Loan: If you find a lender who offers lower rates of interest than the current lender, switch to the new lender. However, check for legal fees and prepayment penalties before you switch.
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Shorter Duration: A shorter tenure will increase the EMIs. But you will be paying lesser amount of interest in the long run.
Types of Home Loan Interest Rates
Current Home Loan Interest Rates
In India, two of the most predominant methods of computing interest charges on the principal amount are as below. Depending in the bank in question, you may be offered both or either of them at the time of availing the loan.
Fixed Rate Home Loans:
In this system of computation, the rate remains even throughout the loan tenor. There will be no change in the interest charges since the rate remains fixed. Depending on the offer, you may be allowed to switch over to the floating rate system after completing a certain duration into the loan tenure.
Advantages: Since the rate remains fixed, you know how much interest charges you’re paying upfront. Your loan will be shielded from frequent rate fluctuations and saves money in a longer run if there is a hike in lending rates.
Disadvantage: If the standard lending rates fall, you will not benefit since the interest component remains frozen.
Floating Rate Home Loans:
As the name suggests, the interest charges on your home loan is subject to the current most lending rates of the bank. The rate is linked to the latest published rate of the bank which in turn depends on multiple factors such as RBIs monetary policy and lending rate revisions, the bank’s response to the revision etc.
Advantage: The most visible perk of opting for the floating rate is that you have the advantage of being billed on the basis of the latest rate. If the rates fall, you save on interest charges.
Disadvantage: In rare scenario, if the standard rates go up, the loan has to be bear the brunt of being billed a higher rate.
Important Note: Some banks allow you to switch from fixed to floating or vice versa, after a stipulated time, say 5 years into the loan. Make sure to inquire about switching at the time of availing the loan and opt for it to make the best use of fluctuating rates in your favor.
Factors To Follow While Applying for a Home Loan
Buying a house is not easy. You have to make sure that the size is right, location is good, area is safe, electricity and water are present 24x7, etc. The most important thing that you have look at is the cost of the house and the way you plan to finance it. One of the best ways is to apply for a home loan.
There are many banks in India that offer amazing home loan schemes at affordable rates of interest. If you are confused and unable to decide which scheme you should apply for, then you must follow the rules mentioned below:
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Compare Interest Rates – If you find a home loan scheme with the lowest rate of interest, do not apply for it in a haste. Look at all the terms and conditions associated with the scheme and try to find out why the rate is so low compared to other house loans. Experts advise people to compare the interest rates of different house loan schemes before applying. There are many websites today that allow users to compare the home loans offered by different banks on one platform.
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Read Lender’s History – Before you borrow a home loan from a bank or any other lender, ensure that you are familiar with its history. Loans are a liability and can result in huge financial problems if you borrow money from an unknown or untrusted lender. Today, the internet has made it easy to find out the history of any lender. You have to look for news about the different lenders online, read up on their history and check out reviews of the services and products they offer. You can also contact mortgage brokers or experts to find out information about any lender.
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Make a Down Payment – While applying for a home loan, ensure that you make a down payment. Do not be attracted by schemes that do not require any down payment. If you apply for a home loan without paying any money upfront, then you might not realise and pay more interest. Also, the more money you pay as down payment, the lower your EMIs will be, which means that you will be able to repay your loan earlier.
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Read the Fine Print – It is very important that you read the fine print before you take a home loan. It may look long and you may be lazy, but reading it will save you from future shocks. The fine print document will contain all the information and term and conditions related to the loan you plan to apply for. If you are unable to understand the clauses mentioned in this document, then ask the help of a Chartered Accountant.
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Understand the Fees and Charges – There are many fees and charges associated with a home loan such as late payment fee, prepayment fee, processing fee, legal charges, documentation charge, etc. You should make yourself aware of all these fees and charges. Ask the lender to give you a list of all the fees in writing.
These are only some of the many rules that you must follow while applying for a home loan. Apart from the above, you should also find out about the tax benefits on home loan and how you can claim them. Once you get your home loan, make sure you pay the EMI on time every month.
How to Calculate The Effective Interest Rate:
The applicable interest rate on home loan consists of two components, the base rate and markup rate. The combination of two is what you will be paying on the loan. Let's explore these components to give you a better understanding.
Base Rate: It is the standard lending rate of the bank, applicable for all retail loans. This rate is subject to frequent changes on the basis of multiple inputs. For example, the current base rate of Axis Bank is 9.45%. Base rate is published on the official website of the bank.
Markup: This component of a small percentage is added to the base rate to arrive at the EIR (Effective interest rate) for a specific type of home loan and varies from one type to another.
Effective Interest Rate (EIR) = Base Rate + Markup:
From April 2016 onwards, the Reserve Bank of India (RBI) has mandated a new method for computing lending rate to replace the base rate system. The Marginal Cost of Funds based Lending Rate (MCLR) is aimed at bringing more accountability and flexibility to the way rates are published by banks and financial institutions in India. RBI mandates banks to fix the interest rate after studying the risk factor associated with lending to borrowers. It takes into account, various factors involved such as repo rate, deposits etc.
This MCLR based computation works out to be slightly lower than the erstwhile base rate.
Factors That Determine Home Loan Interest Rates:
There are multiple factors driven by your background and income group which influence the rate bank offers you. Let’s look at some of leading factors to help you negotiate the best rate.
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Income: One of the most crucial factors considered by lenders to ascertain the interest rate to be offered on your home loan. The amount of salary drawn at the end or month or revenue figures if self-employed is of much interest to banks. The industry you work and your employer also has a say along with the income factor. A stable and high income, sufficient enough to afford the loan will be rewarded with a pleasing interest rate.
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Credit Score: Perhaps, the second most crucial determinant of the rates offered on your home loan. When you apply, the processing involves a thorough scrutiny of your credit report. It involves checks on your past and current credit. It you’re up to date with a good credit score, you’re likely to get a competitive rate. A good credit history also gives you the confidence to negotiate a good deal.
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Location of the Property: The location and vicinity has a bearing too. If the property is situated in a prime location or is being procured from a trusted builder/agency, you can look forward to an optimal charge on the interest rate front.
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Loan Amount: The proposed loan amount has the ability to influence the rate. The representatives are open to negotiate the rate if you’re willing to get a higher amount of loan. The thumb rule is, higher the loan amount, chances are that you will get a lower rate.
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Type of Loan: The rates offered also depends on the types of home loan you’re availing. Standard loans such as home purchasing will come at standard rates while its counterparts like home improvement can be charged a higher rate.
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Loan Tenure: The term opted for has a say when the bank decides the interest rate to be offered to you. Chances are that if you’re willing to opt for a longer term, the interest rate offered is lower. Make sure to check with the bank before signing up so that you can benefit from this practice.
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Type of Interest Rate: In furtherance to the content earlier in this write up, the interest charges on your home loan is dependent on the “Fixed” or the “Floating” rate you opt for. The fixed rate is slightly higher than its counterpart.
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Employment Type: Salaried applicants are likely to get a slightly lower rate compared to the self-employed, owing to the risks involved. Banks’ maintain separate slabs for salaried and self employed applicants.
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Ongoing Promo Offers: Scout for promo offers made by lenders on multiple fronts. Some of these offers are made locally and some at the national level. In their quest to come up with the most customer centric schemes, lenders will tie up with multiple partners such as builders, aggregators to offer tailor made deals which includes competitive rates.
How to Apply for a Home Loan?
There are multiple ways to apply for a home loan. You can do so offline at a designated branch or online, over the internet. It's highly recommended that you compare various loan offers from lenders on a neutral website like bankbazaar, draw conclusions and create an application, all under a single window.
This website provides you the right kind of resources and information to equip you with knowledge to apply and negotiate a good home loan deal. Bankbazaar has partnered with the likes of leading banks and financial institutions in public and private sector, to bring to you, customized loan deals on the basis of your background.
Home Loan Interest Rates FAQ:
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I stumbled upon a term called Pre-EMI interest charges in my newly signed home loan contract. Please explain its nature.
It is the interest applied on the loan amount disbursed by your bank. Such charges are payable every month from the time of disbursement on each release. Pre-EMI interest will continue to be applied until EMI payments start.
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Do I get any tax benefits for the interest charges paid on my housing loan?
Yes, you can claim deduction for the interest charges paid on your home loan under Section 24 of the Income Tax Act. The cap on the tax deduction you can claim on interest paid is Rs.2 lacs for self-occupied property. For a let out property, there is no ceiling prescribed under this section.
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Do banks charge for switching over from fixed to floating rate or vice versa?
Yes, there will be a fee derived on the basis of a percentage of the outstanding loan amount in the account, subject to a minimum amount. For loans with part disbursals, the fee is calculated on the outstanding principal along with the undisbursed value of the loan amount sanctioned.
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How does an increase in interest rate affect my repayment? I am currently under the floating rate system?
With your consent, the bank will make an attempt to increase the loan term to save you from the burden of having to pay additional interest charges. After this change, if the EMI does not cover the interest charges, there will be an increase in the EMI amount. The standard system varies from bank to bank.
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Do banks charge for making changes in the EMI amount due to change in the interest rate? My loan is under the floating rate system?
Generally, there is no charge levied for such changes. However, the amendment is subject to reassessment of your loan repayment history. You may be required to produce additional documents in this regard.
Updates on Housing Loan Interest Rate
War Over Who Offer Cheaper Home Loan Interest Rates Continue: BoB Joins The Battle
Recently, State Bank of India made it to the news when they dropped their lending rates by 5 basis points. The bank claimed to be offering the cheapest interest rate in the market. However, Bank of Baroda has now has now joined the bandwagon stating that they are offering the lowest interest rate for their best rated customers across various categories, irrespective of the loan amount.
- The MCLR offered by BoB at this time is 8.3%.
BoB also stated that other banks who claim that they offer low interest rate offer such benefit to few categories like women borrower who is availing a loan less than Rs.30 lakhs. If you do not fall within this bracket, you will land up paying higher interest rate. However, BoB offers low interest rates across all categories.
- If you are planning on buying a home, this is the right time to apply for a home loan and grad the lowest interest rate in the market.
- You can also check your home loan eligibility using an online eligibility calculator before applying for a home loan.
This will help you negotiate better. While many banks are offering low interest rates on home loans, make sure you compare various home loans and choose a lender who meets your requirements.
RBI Decides to Cut Repo Rate
- Reserve Bank of India or RBI has decided to cut the repo rate to 6%.
- They have brought it down by 25 basis points.
- RBI also intends to further cut rates associated with car loans and home loans.
According to experts in the financial sector, this can prove to be a very good time for the consumers as the EMIs are going to decrease substantially.
This is also the beginning of the festive season. Lenders are going to come up with several festive offers that can help in bringing down the EMIs for the consumers even more Wishfin.com CEO Rishi Mehra stated that the rates associated can come down to 8.2% per annum.
- The total interest paid by a borrower will also go down due to this decrease in interest rates.
- Promotional offers in the festive season will be the key factors for attracting new borrowers.
He added that the existing borrowers under MCLR regime will need to wait for the next reset period. However, if the borrowers see that rate charged is more than the present rate, they can switch the loan to a different lender offering a lower rate of interest.
The base rate customers can choose to switch to MCLT regime if they wish to avail the perks of lower rates. Although there is a fee for the switchover, but in the long run, interest will be reduced substantially.
CEO of Bankbazaar, Adhil Shetty stated that the car loan rates and the housing loan rates are going to reduce and this can be a great time for market growth in different sectors. He added that much traction will be visible in markets like automobile, realty and consumer durables with festivals like Eid, Ganesh Chaturthi and Dusshera coming up in the next few months.
RBI Leaves the Repo Rate Unchanged @ 6%, Cuts SLR to 19.5%
Reserve Bank of India’s six member MPC (Monetary Policy Committee) is headed by Urjit Patel. The committee kept the repo rate or short-term lending rate at 6%. The CRR or cash reserve ratio was also not tweaked by the Monetary Policy Committee.
- The CRR continues to stand at 4%.
- However, the SLR or statutory liquidity ratio requirement has been cut by 50 bps or basis points.
- The statutory liquidity ratio now stands at 19.5%.
The real GVP growth projection for FY 2017-2018 has seen a downward revision from 7.3% to 6.7%. The risks have been evenly balanced. The Monetary Policy Committee’s decision has been consistent with unbiased attitude of the policy in accord with the aim of achieving the mid-term target for the CPI (Consumer Price Index) inflation of 4% within a band of 2%, while offering support for the growth.
Dr. Urjit R Patel, Dr. Viral V. Acharya, Dr. Michael Debabrata Patra, Dr. Pami Dua, and Dr. Chetan Ghate voted in favour of monetary policy decision. However, Dr. Ravindra H Dholakia voted for reduction of rate by 25 basis points. The economic activity has gone up globally since the meeting conducted by the MPC in August 2017.
Stop Paying High Interest Rate On Your Home Loan
When a person signs up for a home loan, they are aware that it is a long term commitment and requires large amount of money to repay. The loan amount is usually way more than the initial amount borrowed as banks charge high interest rate on it. But did you know that you can take certain steps to reduce your interest rate. Though the bank takes the final decision, you can influence them to offer you a better deal on your home loan.
Read on to find more about: Click Here
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