Home Loan Interest Rates

Types of Home Loan Interest Rates:

There are two of the predominant methods of computing interest charges on the principal amount, which are described as below. Depending upon the bank, you may be offered both or any one of them.

Fixed Rate Home Loans:

In this kind of a system, the rate is even throughout the loan tenor ie. there’ll be no change in the interest. You may be allowed to switch over to the floating rate system after completing a certain duration into the loan tenure. Advantage of such a system is that as the rate remains fixed, you know precisely how much interest you are going to pay on MOM basis and you remain unaffected from the roller coasters of interest rate. Disadvantage is in the case if lending rate falls, then you don’t get an advantage of the same as your rates are frozen.

Floating Rate Home Loans:

The interest charges on your home loan is subject to the latest lending rates of the bank. The rate of the bank of lending rate is linked to the factors like (a) RBIs monetary policy (b) Lending rate revisions, the bank’s response to the revision etc.Advantages of such a system is that you are billed on the basis of the latest rate. If in case the rates fall, you save on interest charges. However disadvantages of such a system is that if the standard rates go up, the client needs to bear the brunt of being billed a higher rate. Despite of all disadvantages,from the type of Home Loans, it’s the most popular.

Note: Some banks do allow to switch between fixed and floating, after a stipulated time, say 5 years into the loan. Do inquire about switching at the time of availing the loan. Also opt for it to make the best use of fluctuating rates in your favor.

Teaser Loan or Fixed Cum Floating Rate Loans:

An adjustable-rate mortgage loan in which the borrower pays a Fixed Rate of home loan for the initial period of few years and then for the remaining period of loan tenure pays with a Floating Rate of interest.

Apply Home Loan @ 8.35%*

Home Loan Interest Rate

Bank NameHome Loan Interest RatesMinimum Home Loan AmountMaximum Home Loan Amount
Axis Bank8.65% to 11.75%5 Lakhs10 Crs
Bank of Baroda8.35% to 9.35%1 Lakhs2 Crs
Bank of India8.65% to 8.70%Depends on income5 Crs
Canara Bank8.65% to 8.75%Depends on incomeDepends on income
DBS Bank8.50% to 8.55%40 Lakhs5 Crs
Dena Bank8.60% to 8.85%20 Lakhs1 Cr
HDFC LTD8.65% to 8.75%5 Lakhs10 Crs
ICICI Bank8.75% to 8.85%5 Lakhs10 Crs
State Bank Of India8.60% to 8.70%15 Lakhs10 Crs
Punjab National Bank8.65% to 8.75%20 LakhsDepends on income
Indian Overseas Bank8.65% to 9.15%Depends on incomeDepends on income
Aditya Birla Housing Finance8.65% to 8.89%20 Lakhs10 Crs
Aspire Home finance Corporation Limited14.00%2 Lakhs25 Lakhs
Au Housing Finance12.50% to 17%2 Lakhs1 Cr
India Bulls8.70% to 10.40% 2 Lakhs3 Crs
India Shelter Finance11.75%3 Lakhs25 Lakhs
Jammu and Kashmir Bank8.8% to 9.15%5 Lakhs10 Crs
Sundaram BNP Paribas8.70% - 9.25%15 Lakhs5 Crs
Tata Capital8.65% to 8.85%5 Lakhs10 Crs
Yes Bank10.25% to 10.75%5 Lakhs5 Crs

Home Loan Rules and Regulations

Decision to buying a house is not easy. Several factors related to the house needs to be taken into consideration such as (a) the size is right (b) location is good (c) area is safe (d) electricity and water are present 24x7, etc. but the most important amongst them is the cost of the house and the ways and means to plan finances for it. Probably the best ways is to apply for a home loan.

Many a banks in India offer amazing home loan schemes at affordable rates of interest. Still unable to decide which scheme you should apply for, we have the home loan rules and regulations to help you take most favorable decision for yourself.:

Compare Interest Rates:

Don’t apply for it in a haste, if you find a home loan scheme with the lowest rate of interest. Go through all the terms and conditions related with the scheme and try to figure out why on earth the rate is so low in comparison to other home loans. It’s advisable to compare the  rate of interest / interest rate of different home loan schemes before applying. Easiest and the most convenient way is to browse through various websites which allow on one platform to compare the home loans offered by different banks.

Read Lender’s History :

Experts advise you to be familiar with the history of bank or any other lender before you go for a home loan. As you understand that loans are a liability and can result in a huge financial problems if you borrow money from an unknown or untrusted lender. It’s never easier than today to find the history of lender with the help of internet ie. by looking for news about the different lenders on Google, read their history and check out reviews of the services and products they offer.

Make a Down Payment :

Do make a down payment while applying for a home loan. Beware of the schemes that do not require any down payment as they may attract more rate of interest or there might be some other terms and conditions, that might not be in your favor. Moreover more money you pay for down payment , less would be your EMI,  which means that you will be able to repay your loan earlier.

Read the Fine Print :

It is imperative to read fine print before you take a home loan. You might feel lazy for such a long fine print document, but reading it saves you from future shocks. The fine print document contain all term and conditions and relevant information pertaining to the loan you plan to apply for. Seek help from your Charted Accountant in case you are unable to understand the clauses mentioned in this document.

Understand the Fees and Charges :

Ask the lender to give you a list of all the fees in writing such as late payment fee, prepayment fee, processing fee, legal charges, documentation charge, etc.and make yourself aware of all these fees and charges. .

Note: Also check in for about the tax benefits on home loan and how you can claim them. Make sure you pay the EMI on time every month once you get your home loan.

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Basis for Arriving at Effective Interest Rate

The applicable interest rate on home loan has two components ie (a) the base rate (b) markup rate. You will be paying on the loan the combination of two. For a better understanding let’s explore these components:

Base rate: It is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to its customers.. Base rate is published on the official website of the bank.

Markup: It is a small percentage which is added to the base rate to arrive at the EIR (Effective interest rate) for a specific type of home loan.

Effective Interest Rate (EIR) = Base Rate + Markup

Home Loan Eligibility Criteria

Bank has it’s own home loan eligibility criteria such as your background and income group before offering you the rate. Some of leading factors to have the best rates are:

How Much Home Loan Can I Get On My Salary:

Home Loan eligibility criteria in terms of net take home is one of the most crucial factors considered by lenders in determining the interest rate to be offered on your home loan. Net pay or take home salary for employed or revenue figures if self-employed is of prime interest to banks. Your employer and the Industry you work for also has a say along with the income factor. Suitably high income which is sufficient to afford the loan is rewarded with a best possible interest rates.

Cibil Score For Home Loan:

CIBIL scores are the second most crucial determinant after net pay for the interest rates offered to you on your home loan. It’s a process involves a 360 degree scrutiny of your credit report ie. checking on your past and current credit. To get a competitive rate, you need to have a good credit score which also gives you the confidence to negotiate a good deal.

Location of the property:

Not to mention this important factor of location and vicinity of property. If it is been produced by a reputed builder and / or situated in a prime location, you can hope for an optimal charge on the interest rate.

Loan amount:

Thumb rule is that higher the loan amount brighter chances are of a lower interest rate.

Type of interest rate:

Type of home loan ie fixed or floating interest rate home loan also attracts kind of interest rate. So you need to be sure what you choose depending upon projected market conditions and your financial commitments.

Housing Loan Tenure:

Golden rule is longer the term your chances to opt for better rate are higher. Hence it’s important to check on this aspect with the bank before signing up so as to you can benefit from this practice.

Employment type:

Due to the risk involved with self-employed, salaried applicants are likely to get a slightly lower rate. Banks’ maintain separate slabs for salaried and self employed applicants.

Ongoing promo offers:

Hunt for promo offers made by lenders on multiple fronts. Some of them are made locally and some at the national level. Lenders usually tie up with partners such as builders, aggregators to offer tailor made solutions and deals which has competitive rates.


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