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Home loans offered by banks to salaried and self-employed individuals for purchasing land to build a house, buying an already constructed house or renovating an existing house come with additional interest rate (ROI) on the premium amount at the start of the Equal Monthly Installments (EMI).
The additional interest rate on lump sum loans is important in determining whether you can afford a mortgage. Your income, credit score, repayment term, loan amount, and relationship with the bank play a vital role in getting an attractive interest rate on the amount you borrow.
Following the Reserve Bank of India (RBI) pausing interest rate hikes at 6.50 per cent, most Indian banks have revised interest rates on new home loans offered to salaried and self-employed consumers.
Below is a list of interest rates applied by major banks in India.
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1
Aditya Birla Capital Home Loan
The interest rate is
Annual interest rate: 9.05%
Loan Term
Up to 30 years
Fee
No prepayment fees for variable rate mortgages for individuals
Here is a list of interest rates applied by major banks in India.
Mortgage interest rates for July 2024
Home loan interest rates vary depending on your application, including collateral, guarantor, co-applicant, down payment, security, current income, debt, etc. Most banks also offer preferential treatment to women borrowers and senior citizens.
As of July 8, 2024, the latest interest rates for new home loans being offered by leading banks in India to the general public (employed and self-employed) are as follows:
How do banks calculate mortgage interest rates?
Home loan interest rates offered by Indian banks are usually floating rates, but fixed rates are also available. Fixed rates are fixed for the entire tenure of the loan. In case of floating interest rates, the ROI on EMI is calculated based on the 'base rate' (the bank's standard lending rate) or the lender's Repo-Linked Loan Rate (RLLR) or Marginal Cost of Funds Based Lending (MCLR) plus a spread (the difference between the interest rate a bank pays to depositors and the interest rate it receives on lending to customers).
The ROI on floating interest rates on home loans from each bank changes with changes in the Reserve Bank of India's repo rate (the interest rate at which the central bank lends to public and private banks), but this change is reflected in the floating rate after a 'reset period' when the EMI interest rates are revised.
How to Qualify for a Mortgage in 2024
Home loan eligibility determines the maximum amount a bank can borrow from an applicant. Factors to be considered include:
CIBIL or Credit Score
Applicants with a good credit score and good repayment history are more likely to get the maximum mortgage amount, and anything above 750 is considered good, although most banks will offer mortgages to people with lower scores.
Joint mortgage
If you choose a joint mortgage borrower, usually a spouse, with a higher credit score, you will be significantly better able to qualify for the loan and spread the repayment burden.
Longer tenure
It helps you to lower your EMI amount while opting for a longer repayment tenure.
Settle existing debts
Applicants opting for a home loan may consider clearing existing debts or ongoing installments to enhance their eligibility.
Increased down payment
Banks lend between 75% and 90% of the property price, with the remainder to be paid by the applicant. Consider making a larger down payment to avoid paying high interest at the start of your installment payments.
Featured Partner Offers
1
Aditya Birla Capital Home Loan
The interest rate is
Annual interest rate: 9.05%
Loan Term
Up to 30 years
Fee
No prepayment fees for variable rate mortgages for individuals
How to choose the best home loan
Understanding the various aspects of a loan is essential to choosing the best mortgage for your financial needs. Factors that influence your mortgage choice include:
interest rate
RoI is a key factor that determines how much you will pay at the start of your EMI. Remember, most banks offer a 50 bps discount on regular interest rates to women borrowers.
Maximum Loan Amount
The maximum amount you can borrow will depend on the cost of the property and your income level, depending on other eligibility factors.Banks will lend between 77% and 90% of the value of the property-based plant, including co-applicants, guarantors and collateral, in addition to the mandatory eligibility criteria.
commission
Banks charge this fee for processing your application. The fee ranges from 0.25% to 3% of the loan amount, though some banks do not charge any fee for certain loan tenures and amounts. For salaried and women borrowers, the fee is usually lower, while for those who are primarily government employees, this fee is waived.
Prepayment Fee
If you decide to pay off your loan before its maturity date, a fee will be charged, which varies from bank to bank.
Mortgage grace period
Home improvement loans come with a grace period of three to six months.
What the market offers
Banks should list all relevant information regarding customer care services, interest rates, fees and other topics on their websites, apps, flyers etc. The above table will help you understand the bank offer before visiting the lender’s website or physical branch.
Tax benefits
Home loans are eligible for tax exemptions and deductions under Sections 24, 80C and 80EE of the Income Tax Act to borrowers who have opted for the old tax regime.
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Frequently Asked Questions (FAQ)
What other costs will I incur besides mortgage fees?
Other charges that may apply, which vary depending on the bank, include login fees, registration fees, administration fees, GST charges etc.
Are there any tax benefits to home loans?
The current income tax system has provisions that allow home loan customers to enjoy various tax benefits. We will explain the tax benefits for home loans in detail.
Will the ROI amount paid in EMIs remain the same throughout the contract tenure?
The fixed interest rate on the loan remains the same for the entire tenure of the loan, while the floating interest rate is subject to change based on changes in the RBI's repo rate.
Is it mandatory to obtain a mortgage certificate for a home loan?
Yes, banks evaluate real estate documents, including mortgage certificates, which are issued to individuals as legal documents required to register ownership, execute a sale or transfer real estate.
What benefits do banks offer to women home loan borrowers?
Besides getting a lower ROI than regular borrowers, women borrowers also enjoy benefits such as 1%-2% stamp duty rebate and tax benefits.
Do mortgages and land loans have similar characteristics?
Land loan terms and conditions are often used interchangeably. Most banks allow borrowers to take out a land loan to purchase land, provided that the construction of the house is carried out within a stipulated period from the date of disbursement.
How will rising repo rates affect mortgage borrowers?
The RBI lends to public and private banks at repo rate. Any increase in the RBI repo rate will not affect borrowers with fixed rate home loans, as fixed rates are fixed for some or all of the tenure of the loan. However, the ROI on floating rate home loans from individual banks will change with any changes in the RBI repo rate.