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Home Loan Interest Rates


Interest Rates for Home Loans are undoubtedly the most important parameter to factor into your calculations. And in most cases is the decisive factor for an investor to narrow down on a certain Housing Finance Company's home loan offer. The interest on housing loans in India is usually calculated either on monthly reducing or yearly reducing balance basis.

Comparative Chart on Home Loan Interest Rates

Financial Institutions

Tenure (in years)

Rate of Interest Fixed

Rate of InterestFloating

Processing Charges
State Bank of India Up to 5 years 12.25% 10.75% 0.50% of  loan amount
5-20 years

12.25 %

11.25 %

-
ICICI

0-20 years

10.5%

9.5%

1% of loan amount

LIC Housing Finance Ltd. 0-20 years 10.5%- 11% 9.5% 0.5 per cent of the amount (max. Rs. 5000)
HDFC 0-20 years 13.25% 11.25% 1% of the loan amount  +applicable service taxes and cess)
HSBC 0-20 years 10.75% - 1% of  loan amount
Citibank 0-20 years 9.75% 9.00% 1% of  loan amount
Canara Bank Up to 5 years 10.75% - -
Above 5 yrs up to 10 yrs 11.00% - -
Standard Chartered Bank 0-20 years 10.5% 9.25% 1.25 % of loan amount
Canfin Homes Ltd 0-20 years 9.25%-12% - -
IndusInd Bank 0-20 years

10.5 % (for <20 lakhs)
13% (for >20 lakhs)

9.25 % (for <20 lakhs) 12% (for >20 lakhs)

1.25% of loan amount
Saraswat Bank 0-20 years 11 10 -
HUDCO 0-20 years

10 % (< 10 lacs)
10.5% (>10 lacs)

9% (< 10 lacs)
9.5% (>10 lacs)

0.5 % of loan amount
(Max. Rs.250)

Most HFCs follow the yearly reducing-balance method, which accounts for your principal repayments only at the end of their financial year. Thus, you pay interest on the principal that you have already returned to the HFC. The effective interest rate is thus higher than the quoted interest rate by around 0.7%. Banks and some HFCs, on the other hand follow the daily or monthly reducing-balance method, by which the principal on which you pay interest reduces every month as you pay your EMI resulting in a lower interest burden. Thereby, the EMI for the monthly reducing system is effectively lesser than the yearly reducing system of calculating interest.

Moreover, there are two kinds of interest rates for housing finance in India - Fixed rate and Floating rate interests. Some HFC's have fixed rate of interest which means that the interest rates remain unchanged for the entire duration the loan. This basically means that you do not benefit, even if the rates of interest drop in the market while the floating rate interest fluctuates according to the market lending rate. The interest rates may vary from institutions to institutions and generally range from about 12.5% to around 16%. Repayment is in the form of EMI's (equated monthly installments) so, longer the tenure, the more you pay in interest, but your monthly payment will be less. Generally, the maximum tenure of home loans is 15 years, with a few lenders offering tenure of 20 years or more (ICICI has recently launched a 30 year loan). The longer the tenure, more you pay in total interest, but your monthly payments will be less. So depending on your earning potential and bank balance, you can choose an appropriate tenure. An important requirement of most banks/HFCs is that you pay up the entire loan before you retire.

The Housing Finance Companies and the Banks have variable interest rates depending upon the tenure and types of home loans. Though interest rates for housing finance are not very volatile, one may well be advised to look out for indication of any rate increases or decreases prior to finalizing the timing and amount of loan.




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