Home Loan Interest Rates꘡Compare Rates Of Top Banks
Home loan interest rates are the rates at which the lender Bank/NBFCs lends you funds as a loan to purchase your dream home. You need to pay back the borrowed funds to the lender Bank/NBFCs along with interest in equal instalments for an allotted period of loan tenure. The interest rates of the lenders can be fixed as well as floating, you can choose among the type of interest rate that is best suitable for you. It is the primary factor for comparison and selection of the best bank for home loan.
The home loan interest rate of the banks largely depends on the repo rates of RBI. Repo rate is a rate at which banks borrow from the RBI. With the fluctuations in the repo rates announced by RBI the lenders interest rates also fluctuate. An increase in the repo rate will increase the lending rates of the lenders and vice-a-versa. And so the home loan becomes costlier when the housing loan interest rate increases as it has a direct impact on your EMI outgo. When the RBI reduces the repo rates, the cost of funds of banks reduces which means banks can advance loans to you at a lower cost. Banks determine their lending rates by adding margin percentage (banks percentage of profit) to repo rates. In banking this margin percentage is referred to as SPREAD. The spread percentage differs from bank to bank and NBFC to NBFCs. It is this spread that makes the interest rates competitive among the Banks/NBFCs. Home loan interest rates of the lenders become cheaper or costlier with these spread margins of the banks. The current housing loan interest rates have become cheaper. The rates have touched an all time low of 10 years to nearly 7% p.a. with a reduction in the repo rate to 4% due to the pandemic covid-19 impact on the economy.
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The interest rates can either be fixed or floating. Both have their own advantages and disadvantages. You have to wisely choose between the two that best suits your needs.
1) Fixed Interest Rates: As the name suggests, in fixed interest rates the interest rates offered to you remain fixed for the loan tenure or for the portion of the loan tenure as per the agreement by the lender. Which means you will not be affected by the market fluctuations on interest rates. Even if the lender increases its lending rates you still pay the same EMI. And therefore to get this security for the market fluctuations in the interest rates, generally the fixed rates are higher in comparison to the standard housing loan interest rates. The fixed tenure and the interest rate vary from bank to Bank/NBFC. A fixed rate home loan is preferable when you know there will be a significant increase in the interest rates in the near future.
You can anytime switch from fixed interest rate to floating interest rate after the completion of the fixed tenure with no additional cost. But if you wish to switch during the fixed tenure it might cost you.
- For switching interest rates with an existing lender – you pay a conversion cost or penalty amounting to 0.25%-1% on the outstanding loan amount. The percentage charges vary between the lenders.
- For switching interest rates by switching the lender – you pay a foreclosure charge or penalty amounting to 2%-5% on the outstanding loan amount as per the agreement of the lender. The foreclosure charges also vary between the lenders.
2) Floating Interest Rates: In floating interest rates the interest rates offered to you fluctuate according to the changes in lending rates of the lenders. The repo rate cuts or hike, causes the lending rates to fall or increase which affects your home loan floating interest rate. Because of the fluctuations, it is also referred to as fluctuating interest rates in banking. There are no pre-conditions for switching from floating interest rates to fixed rates. You can even anytime during the tenure of the loan switch your lender to enjoy the benefits of the lower interest rates on housing loan. The process of switching your high interest rate home loan to another lender with low interest rate is referred to as Refinancing in the banking industry. (CLICK to read more on refinancing).There are no foreclosure charges in floating interest rates. You can also make part payment to your floating interest rate home loan with nil prepayment charge. The floating rates are cheaper in comparison to fixed interest rates.
A floating interest rate is preferable when you assume the interest rates to fall in the near future.
Click to switch your high interest rate home loan to 7%-7.50% @ zero processing fees
Read to Know How To Deal With The Increasing Interest Rates Of Housing Loans
Home Loan Interest Rates Of The Top Banks
|Bank||Home Loan Rate Of Interest (Min)||Home Loan Rate Of Interest (Max)|
|Canara Bank||6.90% -7% (Woman Borrower) 7.25%||9.35%|
Note: The interest rates mentioned above are subject to change anytime without any prior notice.
How To Get Low Interest Rates On Housing Loan
All loan borrowers aspire to get the lowest interest rate for their home loan requirements. There are various lenders such as banks-private sectors, nationalized banks, co-operative banks, etc and NBFCs who provide housing loans at attractive interest rates to their customers. The lenders are more inclined to fund you if you pose minimum risk for them. The risk assessment is primarily dependent on the factors such as your profile, industry, earnings, eligibility, age, repayment track, CIBIL score, etc. Your clear profile and CIBIL history & good earnings gives you an additional edge to negotiate on the interest rates.
No one likes to get a housing loan with high interest rates, so here are some key strategies to secure a low interest rate on a housing loan.
1) Add Woman Co-applicant To The Loan
Lenders provide special interest rates for woman loan-applicants. The home loan interest rates for women as an applicant or as an co-applicant are 0.05% – 0.15% lower than the standard home loan interest rates. It is not mandatory to add an earning woman co-applicant to your loan application. But in order to get the interest rate benefit, the woman co-applicant should also be the co-owner in the property.
Read more on Housing Loan Benefits For Women Borrower In India.
2) Maintain Good CIBIL Score And Repayment History
The interest rates that are offered to you largely depend on your CIBIL’s credit score. CIBIL is the authority providing credit ratings to you by keeping track of your every credit transaction and by maintaining all your credit records. CIBIL score has a significant role in the home loan industry. Lenders ascertain the risk involved in funding your home loan by drawing your credit history & CIBIL scores from CIBIL. CIBIL report reflects your repayment track records, payment history, outstanding loan amounts, number of loans taken, types of loan taken, credit enquiries, loan settlement details, loan defaults, credit card overdue, etc. Good CIBIL score of 750 and above can earn you a low interest rate on a housing loan. Many lenders offer additional discounts on interest rates for your CIBIL score above 800. For instance, Canara Bank offers a 6.90% rate of interest if your CIBIL score is 800+. Good CIBIL is a reflection of your timely repayments of loan EMIs. Therefore to get the best home loan rate, it is important that you maintain your credit score by ensuring timely repayment of loan EMIs & by avoiding multiple loan applications to lenders. When multiple loan applications are made to more than 1 lender, lenders pull your credit history and each time they pull it gets noted on your report which are called as hard inquiries which remain on his credit reports for at least two years. Having too many hard inquiries on the credit report marks a negative effect to the credit score. Read to Know How Your Home Loan Inquiry Impacts Your CIBIL Scores
Additional Read: CIBIL And Its Significance In Home Loan
3) Make Comparisons To Bang The Best Offer
You must study, evaluate and compare the interest rates of the different lenders, before making a final decision to apply with one. Compare the best bank for home loan. Comparing will help you to shortlist a lender providing the best possible low interest rates for housing loans. At times lenders also offer special festive discounts on home loan rates or limited period monthly/quarterly offers for their customers. Although interest rate is the primary factor for comparison, the other factors that are to be considered include, funding, LTV, processing charges, turnaround time, etc.
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4) Profile And Employment History
Lenders classify risk of funding by your profile, employment details and professional credentials. Good and steady source of income, employment with a reputable organization, work experiences, designation, etc can gain you a low interest rate on the basis of the employer’s reputation, mainly because the lender is assured of your financial means to make the timely payments of the loan. That is why the lenders demand your employment history for a minimum of two years, including one year with your current employer. A frequent job hopper, although making good per month earnings is uncertain to get a housing loan with low rate of interest.
Lenders have their own list for negative industries, negative profiles and negative professions, falling under which you might face rejections on your home loan applications. However with steady income, bank balances & assets with low or no liabilities, high CIBIL score you can still qualify for a housing loan irrespective of falling into the negative lists of the lender. The decision to fund is the lender’s call and at times approvals are given with high processing fees or interest rates or both. The lesser the credit risk you pose to the lender, the better are your chances to get a housing loan with low interest rates.
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