Home Loan Interest Rates Comparison in India

How to Calculate Home Loan Interest?

Home loans are often long-term loans, therefore it’s crucial to calculate your total interest obligation before applying. One of the two approaches given below can be used to calculate the same thing:

EMI Calculator: By utilising a simple home loan EMI calculator, you can figure out how much interest will be charged on your loan. The fields on the calculator must be filled out using the information listed below:

After entering the necessary information, click the “Calculate” button to acquire a complete breakdown of your loan, including the amount due in interest.

Formula for Calculating EMI: Alternately, you can use the following equation to get your house loan’s EMI obligation: EMI = [P x r x (1+r)n]/[(1+r)n-1]

P is the loan principal, r is the interest rate, and n is the number of payments or the loan term in months.

How is the Effective Interest Rate Calculated?

The applicable interest rate for a house loan is made up of two components: base rate and markup rate. The total of the two will be used to pay back the loan. Let’s go over these things so you can understand.

Base Rate: For all retail loans, this bank’s consistent lending rate is applied. This rate is usually subject to change depending on a number of different factors.

Markup: This component, which is a minor percentage, is added to the base rate to determine the EIR (Effective interest rate), which varies depending on the type of house loan.

Base Rate + Markup = Effective Interest Rate (EIR).

The Reserve Bank of India (RBI) has mandated a new approach for calculating lending rates starting in April 2016 in order to replace the base rate methodology. The Marginal Cost of Funds based Lending Rate (MCLR) was created with the intention of improving the transparency and adaptability of the rates that Indian banks and financial institutions post. RBI instructs banks to set the interest rate after taking into account the risk component associated with lending to borrowers. It takes into account a number of pertinent factors, such as deposits and repo rate. This MCLR computation yields a somewhat lower base rate than anticipated.

Different Home Loan Interest Rate Types

Most banks charge one of two different types of interest rates for house loans.

  1. Fixed Interest Rate: In this method of calculation, the rate stays constant over the course of the loan term. Since the rate is still constant, there won’t be any changes to the interest fees. Depending on the offer, you might be able to change to the floating rate system after the loan tenure has been completed for a specific amount of time.

The rate is still fixed, so you always know how much interest you’ll have to pay up front. If lending rates rise, your loan will be protected from frequent rate changes, saving you money over time. You won’t gain if regular loan rates drop because the interest component is frozen. Yet, fixed home loan rates are still considered the best options by many borrowers.

  1. Floating Interest Rate: Your home loan’s interest payments are based on the bank’s most recent lending rates. The rate is based on the bank’s most recent stated rate, which in turn is influenced by a number of variables, including adjustments to the RBI’s monetary policy and lending rate as well as the bank’s reaction to the modification.

Benefit: The most obvious benefit of choosing the floating rate is that you will be billed according to the most recent rate. If the rates decline, you avoid paying interest.

Occasionally, if the standard rates increase, the loan borrower will have to shoulder the cost of the higher rate.

Home Loan Interest Rate of all Banks 2023

Banks Starting Interest Rate Per Annum Processing Charges
Kotak Mahindra Bank 8.65% p.a. onwards 0.50%
Citibank 6.80% p.a. onwards Rs. 10,000
Union Bank of India 8.60% p.a. onwards
Bank of Baroda 8.60% p.a. onwards Contact the bank for information
Central Bank of India Contact the bank Rs. 20,000
Bank of India 8.65% p.a. onwards
State Bank of India 8.75% p.a. onwards 0.35% onwards
HDFC Home Loans 8.60% p.a. onwards* 0.5% or Rs.3,000 whichever is higher
LIC Housing Loan Interest Rate 8.90% p.a. onwards Rs. 10,000 -Rs. 15,000
Axis Bank 8.60% p.a. onwards Rs. 10,000
Canara Bank 8.55% p.a. onwards 0.50% of the loan amount
Punjab and Sind Bank 8.60% p.a. onwards Full Waiver
IDFC First Bank 8.75% p.a. onwards Rs. 5,000 – Rs. 5,000
Bank of Maharashtra 8.35% p.a. onwards Rs. 10,000
Indian Overseas Bank 9.30% p.a. onwards 0.50% (Max Rs. 20,000)
Punjab National Bank 8.55% p.a. onwards 0.35% (Max Rs. 15,000)
UCO Bank 8.75% p.a. onwards 0.15% (Rs. 1,500 – Rs. 15,000)
IDBI Bank 8.75% p.a. onwards 0.50% (Rs. 2,500 – Rs.5,000)
HSBC Bank 8.35% p.a. onwards 1% (Rs. 10,000)
Karur Vysya Bank 8.95% p.a. onwards Rs. 5,000
Saraswat Bank Home Loan 8.60% p.a. onwards Nil
Jammu and Kashmir Bank 8.00% p.a. onwards Rs. 500 – Rs. 10,000
South Indian Bank Repo Rate + 3.35% p.a. onwards 0.50% (Rs. 5,000 – Rs. 10,000)
PNB Housing Finance Limited 8.75% p.a. onwards Up to 0.50%
Federal Bank 9.90% p.a. onwards Rs. 3,000 – Rs. 7,500
Standard Chartered Bank 8.40% p.a. onwards 1%
Aavas Financiers Contact the bank 1.00%
Karnataka Bank 8.67% p.a. onwards Rs. 250
Sundaram Home Finance Contact the bank Rs.3,000 (for salaried)
Dhanlaxmi Bank Contact the bank Rs. 10,000
Tata Capital 8.95% p.a. onwards 0.50%
Tamilnad Mercantile Bank 8.75% p.a. onwards Rs. 15,000
Bandhan Bank 8.65% p.a. onwards 1% (Rs.5,000)
Yes Bank 8.95% p.a. onwards 1% (Rs. 10,000)
Hudco Home Loan 8.35% p.a. onwards NA
Indiabulls 8.95% p.a. onwards 0.50% onwards
Aditya Birla 8.50% p.a. onwards 1%
GIC Housing Finance 8.10% p.a. onwards Rs. 2,500
Reliance Home Finance Contact the bank Rs. 3,000 – Rs. 6,500
Shriram Housing 9.50% p.a. onwards NA
India Shelter Finance 13.00% p.a. onwards 2.00%

These are the rates that you should keep in mind before choosing any financial institution for a home loan. Keep tracking this information at official websites for more updates, since rates may change periodically.

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