If an individual wants to buy a new home and intends to take a loan against it, then considering the home loan interest rates become crucial. As the cost of homes continue to rise, finding an affordable loan is hectic but necessary.
Understanding various involved factors and being aware of present home loan interest rates from different banks and financial institutions can help borrowers make better decisions.
Latest home loan rates for banks and NBFCs
Different banks and financial institutions offer different interest rates on home loans.
The present home loan interest rate charged on salaried employees varies from 8.70% to 15%. In the case of top-up, the rate ranges from 9.80% to 18%.
For self-employed individuals, a home loan ranges from 9.10% to 15%, and for a top-up, it varies from 10% to 18%.
Also, other fees on home loans are levied upon the borrower apart from interest rates. Processing fee charges of up to 7% of the loan amount, a secure fee of up to Rs. 9999 (charged once) and penal interest of up to 2% are some additional charges.
A loyal customer of a financial institution gets certain benefits of pre-approved loans while applying for home loans. An applicant can take advantage of such deals by submitting their name and contact details.
Changes in home loan interest rates by banks and NBFCs
Home loan interest rates charged by banks and monetary institutions change at intervals. One of the prime causes of such changes is the fluctuation in repo rates.
Repo rate is the rate at which the RBI lends to banks. In February 2023, RBI hiked the policy repo rate from 6.25% to 6.50%, leading to a change in the EMIs on home loans for borrowers.
Calculating home loan interest rates
The interest on home loans levied by the banks is generally floating, even though fixed interest rates are also available. The interest rate gets calculated with the help of a housing loan EMI calculator.
The ROI on the EMI of a borrower gets calculated according to “base rate”, or “lender’s repo rate-linked loan rate (RLLR)” or “marginal cost for fund-based lending rate (MCLR)”, plus spread.
The formula involved is –
EMI = [P x r x (1+r)^n] / [(1+r)^(n-1)], where,
‘P’ is the principal borrowed amount
‘r’ is the interest rate on the loan
‘n’ is the loan tenure in months
Factors to consider for getting a lower home loan interest rate
Some significant factors borrowers can consider before applying for home loans include the following.
- Maintaining good CIBIL score
When applying for a home loan, an individual with a good CIBIL score (more than 700) can benefit from a lower interest rate. Paying credit card and payment bills on time can result in a higher credit score.
- Comparing interest rates online
Borrowers must compare the present home loan interest rate offered by different banks and institutions before applying. Some banks offer benefits and deals that can lower the rate, thus allowing the borrower to save money on EMIs.
- Opting for shorter tenure
The loan tenure is a significant factor that changes the interest rate on home loans. Short loan tenures can increase the interest rate, and longer tenure loans can decrease the applicable rate.
Therefore, before applying for a home loan, a borrower must evaluate all the details and conditions and assess suitability as per their financial needs. Nonetheless, this present home loan interest rate can further change in the upcoming days based on the change in RBI guidelines and market conditions.