Overview

Home loan help you realise your dream of owning a house without breaking your savings and investments or impacting your other important financial goals such as children’s higher education and retirement. It comes with a host of benefits and features, including high-value financing of up to Rs. 10 crore, low interest rates, flexible repayment tenure of up to 30 years, annual tax benefits, PMAY subsidy of up to Rs. 2.67 lakh, balance transfer facility and top-up loan facility. Housing loans can also be availed by those who need funds to construct a house or expand, repair and renovate an existing property. As the home loan market is crowded, finding the best home loan offer can be challenging. At Paisabazaar.com, we help you compare, select and apply for the best home loan rates from India’s top Banks and Housing Finance Companies (HFCs). We provide comprehensive information on home loans along with the convenience to apply for home loan online and get an instant conditional e-Approval in just a few steps.

Home loan benefits vary across different lenders and loan schemes. Some of the common home loan features ones are listed below:

• Low Interest Rates: Banks and financial institutions offer reasonable and attractive interest rates to make home loans more affordable
• Flexible Loan Tenure: Home loan repayment period usually extends till 30 years, giving you a benefit of lower EMIs and a greater flexibility of repayment
• Annual Tax Benefits: Claim a total tax deduction of about Rs. 5 lakh on the principal and interest components of your housing loan (under section 80C, 24b and 80EEA)
• Subsidy under PMAY: First-time homebuyers can save up to Rs. 2.67 lakh on interest through Pradhan Mantri Awas Yojana (Urban) Credit Linked Subsidy
• Home Balance Transfer Facility: In home loan balance transfer, you can refinance your existing home loan to another lender offering lower interest rate or better loan terms
• Top-up Loan Facility: In top-up loan facility, you can borrow additional sum over and above your existing home loan and use it for any personal or business purposes

Interest Rates

Home loan interest rate starts at 6.80% p.a. It varies across lenders and loan schemes. Home loan rates depend on several factors such as credit score of the applicant, quantum of the loan, repayment capacity of the applicant and tenure.

Lenders offer home loans either at fixed interest rates or floating interest rates.

Fixed Rate Home Loan

In case of fixed rate home loans, the rate of interest applicable at the time of loan disbursal remains same throughout the loan period. And because of the unchanged interest rate, the loan EMIs also remain constant.

Pros

• Since the home loan rate remains constant, you will know exactly how much interest you have to pay for the loan, helping you plan out finances well in advance
• Again, since the rate remains the same throughout the loan tenure, you will be shielded if any time, during the loan tenure, the lending rates rise

Cons

• The interest rate for fixed rate home loans is usually 1% - 2.5% higher than the interest rate for floating rate home loan
• At any time during the loan tenure if the lending rates fall, the fixed interest rate will remain unchanged, giving you no benefit of the reduced EMIs.

Floating Rates

In case of floating rate home loan, the interest rate is subject to change as per the change in the linked benchmark rate as published by the lender (such as Repo Rate) which in turn is dependent on several factors such as RBI policies and other external factors.

Pros

• Floating interest rate home loans are cheaper as compared to fixed interest rate home loans
• RBI mandates no prepayment or foreclosure charges for individuals borrowing a floating rate home loan.

Cons

• The only problem with a floating rate home loan is that its EMIs change with the change in the interest rate, which can create difficulty in planning expenses in advance.
• Both types of home loan interest rates have their own list of pros and cons. When it comes to choosing between fixed and floating interest rates on home loans, pick the one that suits your needs the best.

Top Banking Offering Lowest Home Loan Interest

Anyone looking for a home loan would want to avail it at the lowest rate possible as it will help them save considerably on the overall interest outgo. Given below is the table of top banks offering lowest interest rates in India

*GST as applicable

• *To calculate Home Loan EMI, the loan tenure is assumed as 30 years.

Note: Interest Rates offered by Banks, NBFCs and HFCs are subject to change as per the directives of RBI and lenders’ discretion

EMI Calculator

Knowing your home loan EMI in advance can help you plan your finances beforehand and avoid any financial hassles in future. To help you calculate your home loan EMI in seconds, Paisabazaar.com brings you a free-of-cost home loan EMI calculator. The home loan calculator is easy to use as it requires only loan amount, interest rate and loan tenure to give you accurate results.

Types Of Home Loan

Banks and Housing Finance Companies (HFCs) offer home loans for different purposes. So before applying for any type of home loan, assess your requirements in order to get a suitable home loan scheme. Some of the types of home loans available are as follows:

1.Home Purchase Loan: It is the most common type of home loan availed usually to buy ready-to-move-in properties, under construction properties and pre-owned homes/resale properties. As per RBI guidelines, lenders can offer loan-to-value (LTV) ratio of up to 75-90% of the property value.

2.Composite Loan: It is a perfect financing solution for individuals who want to buy a plot of land either for investment or for building a house. In this type of home loan, the first disbursement is made towards the purchase of plot. The subsequent payments depend on the stages of construction of the house.

3.Home Construction Loan: This type of home loan is available for individuals who want funds for the construction of a house. The loan is granted only if you own a plot of land and plan to construct a house on it. Just as in composite loan, here too the disbursement depends on the stages of construction of the house.

4.Home Improvement Loan: The can be availed to fund home renovation and home repairing expenses of the existing house. The interest rate for this loan is same as that for a regular home loan. However, its loan tenure is shorter than the regular home loan.

5.Home Extension Loan: It is for those who require funds to add more space to their abode. Under this loan type, financial institutions usually lend 75-90% of the construction estimate, depending on the loan amount and LTV ratio.

6.Bridge Loan: It is a short-term home loan and is suitable for individuals who wish to buy a new house with the sale proceeds of the existing home. The loan helps in covering the gap between the purchase of a new house and the sale of an existing house.

7.Interest Saver Loan: It is similar to home loan overdraft facility. In this, the borrowers’ home loan account is linked to their bank account. Any amount deposited in the bank account over and above the EMI amount is used as prepayment towards the loan, thus, saving on the interest amount.

8.Step Up Loan: Yet another type of home loan in which borrowers pay lower EMIs during the initial years of the loan tenure. However, there is a provision of increasing the EMI amount over time. This makes the loan affordable for young professionals who just start their career.

Eligibility

Home loan eligibility differs across lending institutions and loan schemes. However, common set of housing loan eligibility criteria is given below:

Nationality: Indian Residents, Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs)

Credit Score: Preferably 750 and aboveAge

Limit: 18 - 70 yearsWork Experience: At least 2 years (for salaried)

Business Continuity: At least 3 years (for self-employed)

Minimum Salary: At least Rs. 25,000 per month (varies across lenders & locations)

Loan amount: Up to 90% of property value.

Required Document

Home loan application forms usually have a checklist of documents that applicants need to submit to their lenders. These documents are usually same for all lenders; however, a few specific requirements may vary depending on the chosen loan scheme, purpose of the loan and individual credit profile.

Some of the common documents required for getting a home loan are:

Note: The above list is indicative and your lender might ask for additional documents.

• Duly filled in and signed home loan application form
• Passport size photographs, as required
• Proof of Identity: Copy of any one (PAN Card, Passport, Aadhaar Card, Voter’s ID Card and Driving License)
• roof of Age: Copy of any one (Aadhaar Card, PAN Card, Passport, Birth Certificate, 10th Class Mark-sheet, Bank Passbook and Driving License)
• Proof of Residence: Copy of any one (Bank Passbook, Voter’s ID, Ration Card. Passport, Utility Bills (Telephone Bill, Electricity Bill, Water Bill, Gas Bill) and LIC Policy Receipt
• Proof of Income for Salaried: Copy of Form 16, latest payslips, IT returns (ITR) of past 3 years and investment proofs (if any)
• Proof of Income for Self Employed: Details of ITR of past 3 years, Balance Sheet and Profit & Loss Account Statement of the Company/Firm, Business License Details and Proof of Business Address
• Property-related Documents: NOC from Society/Builder, detailed estimate of the cost of construction of the house, registered sale deed, allotment letter and an approved copy of the building plan

Fee & Charges

Besides the interest amount, there are several other fees and charges that your lender might levy from the time of applying for the home loan till you repay it entirely. Here are some of the charges:

Application Fee is charged by lenders to cover all the preliminary expenses that they bear for conducting verification.

Processing Fee covers the cost of credit appraisal and depends on the borrowers’ credit profile, income and the home loan scheme. Also, not all lenders levy processing fee.

Administrative fee is charged by those lenders who split the processing fee into two parts. The part charged after the loan sanction is known as the administration fee.Citibank is one of the banks to levy administrative fee.

Foreclosure/Prepayment Charges are levied when a borrower prepays the home loan either fully or partially before the end of loan tenure. Earlier, lenders used to charge prepayment penalties and foreclosure charges on home loan. But RBI banned lenders from charging individuals with prepayment penalties on floating rate home loans. As far as fixed rate home loans are concerned, some lenders levy these charges.

Repayment Mode Related Charges are levied when borrowers request their lenders to change their existing repayment mode during the loan tenure. The fee usually goes up to Rs. 500 per instance (swap) and varies from one lender to another.

Rate conversion/switching fees are charged when borrowers request their lenders to switch or reduce their existing interest rates due to various reasons. The fee varies from one lender to another and usually goes up to 2% of the outstanding principal amount.

CERSAI Charges (Central Registry of Securitisation Asset Reconstruction and Security Interest) is central online security interest registry of India. Potential lenders visit CERSAI website to check whether the pledged property is not claimed by some other lender. For this process, the lenders pay a nominal fee, which they later collect from borrowers.

Overdue Charges on EMI are levied when a borrower misses or delays timely payment of loan EMIs. It attracts penal interest rates on the outstanding dues or overdue instalment over the prevailing loan interest rates. Therefore, borrowers must pay loan EMIs on time.

EMI Bounce Charges are levied when you fail to make timely loan payment due to insufficient funds in your bank account. Lenders usually levy Rs. 500 on such defaults which may vary from one lender to another.

Legal Fee is usually included in the processing fee but some lenders charge it separately when they engage firms to scrutinise borrowers’ legal documents.Franking Fee, commonly referred to as stamp duty fee, is a tax levied by the state government on any form of monetary transaction involving the transfer of rights of a property. The amount varies from one state to another, and depends on state laws, type of property, etc.

How To Apply?

Step 1: Enter details such as property cost, employment status, your name, email ID, date of birth, PAN and residence pincode.

Step 2: View best home loan offers by top banks and housing finance companies, sorted on the basis of your chances of approval. Compare interest rate, processing fees, EMI and maximum loan amount on different home loan offers. Select the loan offer that suits you the best and fill out any additional details that may be required.

Step 3: Get an instant conditional e-Approval from the lender. Furthermore, our home loan experts will guide you through the documentation process required for home loan processing and disbursal.

ProcessOnce you have submitted your online home loan application on Paisabazaar.com, your chosen lender will receive your loan request. Subsequently, the lender’s representative will call you to verify the application details and take the home loan process forward.

Some Factors

Rate of Interest: Some home loan providers charge fixed and some floating rate of interest on home loans. Fixed interest rates are considered ideal for loans with shorter tenure, while floating is suitable for loans with longer tenure. Some lenders even offer hybrid home loans in which the borrower can enjoy the benefit of both fixed and floating interest rates.

Loan Disbursal Time: The time for home loan disbursal varies from one bank to another. It usually takes around 10-15 days for loan processing and disbursal. Choose a home loan provider which takes lesser time and does not cause unnecessary delays in home loan processing.

Loan Eligibility: Home loan eligibility criteria vary across lenders and home loan schemes. It is determined by the borrower’s age, income, work profile and stability, credit history, etc. . Always use home loan eligibility calculator to be sure whether you are eligible for the home loan or not.

Hidden Charges: Loan providers levy a number of additional charges, such as the processing fee, prepayment or foreclosure charge, etc. It is best to read the fine print before making the final choice so that you do not end up feeling pick-pocketed when such charges are levied.

Terms and Conditions: When choosing a home loan, terms and conditions pertaining to repayment, prepayment, loan transfer, etc. must also be taken into account.

Prepayment & foreclosure

Home loan prepayment is when a borrower prepays his/her home loan partly before the end of the loan tenure. Loan prepayment helps in reducing the loan principal amount, which subsequently reduces the EMI amount. If the borrower has no issues with continuing with the on-going EMI amount, he/she can request his/her lender to reduce the loan tenure instead of reducing the loan EMI.

Home loan foreclosure, on the other hand, is when a borrower fully repays the home loan in a single payment instead of paying in instalments before the end of loan tenure.

Earlier, lenders used to charge prepayment penalties and foreclosure charges on floating rate home loans. But now RBI has mandated all lenders to not levy loan foreclosure and prepayment charges on floating rate housing loans when individuals pre-close the loan. However, on fixed rate home loans, some lenders still levy these charges.

Some facts

Which bank is best for home loan? A. Some of the most popular banks offering home loans in India are HDFC Bank, SBI, PNB, ICICI Bank, Bank of Baroda, Axis Bank and Canara Bank. However, the best home loan for you would be the one that matches your needs. Therefore, to get the best bank for home loan first analyse your requirements. Also, when comparing home loan offers don’t jump for the offer that offers lowest interest rate, rather check on the entire deal. Besides the interest rate, pay attention to other parameters such as loan repayment and prepayment policies, processing fees, etc.

Are there any tax benefits of a home loan? A.Yes. Both the loan principal amount and the interest paid towards loan repayments provide tax benefits under Section 80C`, Section 24(b) and Section 80EE of the IT Act respectively.

Can I get a home loan for the entire property value? A.No. Banks usually keep a 20% margin when providing individuals with a home loan. This means that the lender may agree to provide you with 80% of the property value as a home loan, while you will have to shell out the rest 20% by yourself. In some cases, the lender can agree to provide you with up to 90% of the property value as a home loan.

Who can co-sign a home loan with me? Can my friend co-sign a home loan for a flat?A.Your family members like father, mother, siblings, etc. can co-sign a home loan with you. Other than that your spouse or adult children can also be co-signatories in case you are applying for a home loan. In India, as per existing rules, your friend cannot co-sign a loan as he/she is not a blood relative or otherwise related to you.

How many people can co-sign a home loan with me?A.At present, up to 7 people can co-sign a home with the primary applicant. However, all of them need to be blood- relatives of the family member.

What are the reasons for home loan rejection?A.

• Factors that can play a crucial role in home loan rejection are mentioned below:
• Bad or low credit score
• Incorrect personal details in credit report
• Rejection of loan by other banks
• Unstable income
• Age factor
• Location of the property
• Poor repayment capabilities

How to avoid home loan rejection?A. The below mentioned steps can prove to be beneficial to avoid home loan rejection: Credit Score: It is advisable to maintain a credit score of 750 and above to have a good chance of your application being approved. Banks & Financial Institutions rely on credit score before approving your home loan to check your credibility and loan repayment history. So, you should always maintain your credit score to avoid home loan rejection. Insufficient Income: Banks and financial institutions look into your monthly income to see if you will be able to repay your equated monthly instalments (EMIs) or not. It is always advisable to take a home loan with EMI not more than 40% of your monthly income. Lenders have certain minimum income and employment requirements which play an important role in the loan-approval process. Make sure that you meet all the requirements before you apply for a home loan.
Too many applications for home loan in a short span of time: If you apply for a home loan from different lenders, it indicates banks and financial institutions that you are short of credit and need to apply to several sources to fill the gap. Lenders think that you will not be able to repay your loan, which leads to rejection of your home loan application. Existing loan portfolio: Currently, if you have a number of loans to repay, then your lender might think that you will not be able to take on another EMI on your existing income, which will lead to your home loan rejection. So, it is better to apply for a home loan once you have paid off a few of your other loans to reduce your EMI burden.

How to improve home loan eligibility?A.

Potential home loan borrowers can enhance their home loan eligibility in the following ways:

Improve your credit score: A good credit score improves your chances of loan approval so that you can avail a home loan at lower interest rates and better terms. Paying your bills on time and maintaining credit utilisation ratio below 40% are some of the ways to improve and maintain your credit score.

Pay higher down payments: Financial institutions lend 75-90% of the property value. This implies that the remaining 10-25% of the property value has to be contributed as down-payment by borrowers. To increase your home loan eligibility, make higher contribution towards your home loan down payment. Doing so will lower your LTV ratio; thus, improving your home loan eligibility.

Add an earning co-applicant: Add an earning co-applicant with good credit history and satisfactory repayment capacity to increase your home loan eligibility. Joint home loan might even help you get higher loan amount and concession on your home loan interest rates (if the co-applicant is a woman).

How home loan EMI is calculated?A. Equated Monthly Instalment (EMI) is the amount that you repay each month against your home loan principal amount and its interest amount. So, while calculating the home loan EMI, both the principal amount and the accrued interest on the loan is taken into consideration.

Are there any prepayment charges in case of a home loan?A. In case of a floating rate home loan, lenders don't charge a pre-payment penalty as per RBI directives however a penalty may be applied in case of prepayment of a fixed-rate home loan.

What is home loan balance transfer?A. Home loan balance transfer is a facility that allows home loan borrowers to transfer their outstanding home loan to a new lender for lower interest rate or better loan terms. Almost all lenders offer the home loan transfer facility to their customers. Paying your loan EMIs regularly is one of the factors that help you enjoy loan transfer facility. But before going for home loan balance transfer, carry out a cost-benefit analysis. Calculate the difference between the interest rates offered by the two lenders, the amount of the loan left unpaid and the remaining tenure.

Home loan balance transfer is not an ideal option if the outstanding loan amount is low, if only a few repayment years are remaining or the difference in the interest rate is leading to negligible savings. Also, do not forget to consider processing fee charges, which the new lender would be charging for balance transfer.

Home loan benefits vary across different lenders and loan schemes. Some of the common home loan features ones are listed below:

• ✶ Low Interest Rates: Banks and financial institutions offer reasonable and attractive interest rates to make home loans more affordable
• ✶ Flexible Loan Tenure: Home loan repayment period usually extends till 30 years, giving you a benefit of lower EMIs and a greater flexibility of repayment
• ✶ Annual Tax Benefits: Claim a total tax deduction of about Rs. 5 lakh on the principal and interest components of your housing loan (under section 80C, 24b and 80EEA)
• ✶ Subsidy under PMAY: First-time homebuyers can save up to Rs. 2.67 lakh on interest through Pradhan Mantri Awas Yojana (Urban) Credit Linked Subsidy
• ✶ Home Balance Transfer Facility: In home loan balance transfer, you can refinance your existing home loan to another lender offering lower interest rate or better loan terms
• ✶ Top-up Loan Facility: In top-up loan facility, you can borrow additional sum over and above your existing home loan and use it for any personal or business purposes