Home Loan
A Home Loan is a secure financial product offered against the value of a property or house that you intend to purchase. It can be utilized for buying a house, constructing a new property, or renovating an existing house. A home holds the cherished moments of our lives, but acquiring one is a challenging endeavor that requires substantial funding.
If you aspire to buy a new house and require financial assistance to fulfill your dreams, you can apply for a home loan. This specialized loan is designed to address these specific needs. Major banks and non-banking finance companies across the country offer home loans to facilitate your homeownership journey.
Home Loan: Features
- Low-Interest rates: Home loans are cheaper than the other loans because of its long term tenure period.
- Tax Benefits: Availing of a home loan can provide you with tax benefits on both principal amount as well as interest rates. Section 24 and 80 C allows a person to claim a tax deduction of up to 2 lakh on availing a home loan.
- Home Loan balance transfer: allows a person to transfer the entire outstanding amount to a new lender, who offers a lower rate of interest.
- Flexible Loan Tenures: The home loan tenures usually go up to 30 years. An individual can also choose to prepay the entire amount if he is eligible to do so.
Home Loan Intereset Rate
Bank Name | Interest Rate | Processing Fee | Loan Amount | Tenure
|
HDFC Home Loan | 6.95-7.50% (floating) | Up to 0.5% | Rs 5 lac- 10 cr | 1-30 years
|
Axis Bank Home Loan | 7.85-11.75% (fixed/floating) | 0.50% | Rs 5 lac- 10 cr | 1-30 years
|
Private Bank Home Loan | 7.45-10.35% (floating rate) | up to 0.50% + tax | Rs 5 lac- 10 cr | 3-30 years
|
PNB Housing Loan | 8.85-9.85% | up to 0.25% + GST | Min. 8 lac | 1-30 years
|
SBI Home Loan | 6.95-7.50% | 0.35% | Rs 5 lac- 10 cr | 1-30 years
|
Bank of Baroda | 6.85-7.85% | Loan amount up to Rs.50 lakh – 0.50%
Loan amount above Rs.50 lakh – 0.25% | Rs 1 lac- 2 cr | 30 years
|
Canara Bank | 6.90-8.90% | 0.50% | Rs 1 lac- 50 lac | 30 years
|
DHFL Home loan | 9.75-10.50% | up to 0.50% | Rs 1 lac- 3 cr | 1-30 years
|
Types of Home Loans
Banks and NBFCs in India provide different types of home loan options according to various needs. Here’s a list of the main types of housing loans availing in India:
- New Home Loans: Offered to individuals purchasing a new house or property for the first time.
- Home Renovation Loans: Designed for borrowers who want to renovate or extend their existing house.
- Balance Transfer Home Loan: Enables borrowers to transfer their existing home loan from one bank to another in search of lower interest rates.
- Home Purchase Loans: Specifically provided to borrowers seeking to purchase a residential house or flat.
- Home Loan for Construction: Offered to customers looking to construct a new house on an existing piece of land.
- Plot Loans: Provided to customers interested in purchasing a piece of land or plot for future house construction.
- Home Loan Top Up: An additional facility allowing existing customers to borrow a certain amount over their existing home loan.
- Step-up Loans: Allows borrowers to initially pay lower EMIs during the early repayment period, with gradually increasing installments as the tenure progresses.
- Bridge Loan: A short-term housing financing option that assists borrowers in bridging the gap between their existing and new mortgages, using the equity of their current residence as a down payment for the new house while waiting for the sale of the old house.
- Interest Saver Loan: Provides the option for borrowers to deposit excess savings in a current account linked to their home loan, with the balance in the current account deducted from the outstanding principal for interest calculation.
- Home Extension Loan: Available for extending an already existing residential property by adding space or new rooms to it.
Home Loan Rejection
Do’s |
Don’t |
| Ensure that you have researched the loan you want to apply for | Do not blindly sign the documents before you read every term and condition on it |
| Read the fine print before taking the loan | Do not forget to compare interest rates offered by different loan providers |
| Look out for any charges applicable on prepayments and foreclosure | Do not default on your monthly payments |
| Make sure you pay the equated monthly instalments (EMIs) on time | Do not apply for a loan just for the sake of it |
| Ensure that you have a good credit score before you apply | Do not sign the home loan agreement before reading the clauses |
| Apply for a loan amount you are eligible for | Do not request for a change in tenure unless you have considered all the aspects |
| Submit all the necessary documents | Do not submit an incomplete or mismatched loan application |
| Ensure that you have stable employment | Do not have too many ongoing loans |
What to do if your home loan application is rejected?
- Credit Score: Lenders assess your ability to repay a housing loan, considering factors such as your credit score. If your credit score is low, there is a higher chance of loan rejection. It is advisable to check your credit score and report before applying for a loan.
- Loan Amount: When determining your loan eligibility, banks and financial institutions take into account your current monthly salary. If the requested loan amount exceeds your eligibility, the lender may reject your application. In such cases, increasing your down payment can help reduce the total loan amount.
- Other Ongoing Loans: Having multiple outstanding loans can lead to a home loan rejection. Lenders generally prefer that your monthly loan repayments do not exceed 50% of your income. If you have too many ongoing loans, it may be wise to consider reducing them before reapplying.
- Co-applicant: Lack of funds can be a reason for application rejection. Including a co-applicant, such as a family member, can increase your eligibility by considering their income and creditworthiness.
- Employment Stability: Your employment history can impact the lender’s decision. Frequent job changes or unstable employment can lead to rejection. On the other hand, having a stable job with a reputable organization can strengthen your application.
- Documentation: Home loans require various documents, including identification proof, residency proof, bank statements, income tax returns, income proofs, property papers, and authorized documents. Missing any essential document can lead to application rejection.
If your home loan application is rejected, it is crucial to understand the reasons behind the rejection and address them accordingly. Working on improving your credit score, reducing outstanding loans, providing additional documentation, or considering a co-applicant can increase your chances of loan approval in the future.
Top Home Loan Schemes & Offers
- Kotak Mahindra Bank – Best for Low-Interest Rate
- Low interest rates start at 6.65% per annum.
- Loan term of up to 30 years Processing fee of up to 0.50 per cent of the loan sum
- There are no fees for paying in advance.
- Balance transfer with the option of a top-up loan is open.
- SBI Bridge Home Loan – Best for Short-Term Requirements
- Attractive interest rates begin at 9.50 per cent per annum.
- 0.35 per cent of the loan amount is charged as a processing fee.
- Loans with a maximum term of two years are available.
- There is no penalty for paying in advance.
- There are no secret fees.
- Private Bank Extra Home Loans– Best for Long Term Requirements
- Low interest rates start at 6.90 per cent per annum.
- Loans with a maximum term of 30 years are available.
- 0.5 per cent of the loan amount is charged as a processing fee.
- Both salaried and self-employed individuals are eligible.
- There are no fees for paying in advance.
- Canara Bank Housing Loan – Best Interest Rate for Women
- Women’s low-interest rates start at 6.90 per cent per annum.
- A maximum repayment period of 30 years is available.
- A fee of up to 0.50 per cent of the loan amount can be charged as a processing fee.
- Can be used to buy or build a home or apartment.
There are no fees for paying in advance.
- Axis Bank Home Loan – Best Interest Rate for Salaried Employees
- Low-interest rates starting from 6.90% p.a.
- Loan amount of up to Rs.5 crore
- Maximum repayment tenure of 30 years
- Processing fee of up to 1% of the loan amount
- No prepayment/foreclosure charges
- SBI Home Loan – Joint Home Loan
- Low interest rates start at 6.70 per cent per annum.
- Loans with a maximum term of 30 years are available.
- If you apply via the YONO app, you’ll get a 100% refund on your processing fee.
- There are no secret fees.
- Borrowers who are women are eligible for interest rate reductions.
- HDFC Reach Home Loans for self-employed professionals
- Attractive interest rates begin at 8.75 per cent per annum.
- Repayment terms of up to 30 years are available.
- 2% of the loan sum as a processing fee
- With a minimum annual income of Rs.2 lakh, minimal documentation is needed.
- For lower interest rates, add a female co-owner.
- LIC HFL Home Loan for Pensioners/Senior Citizen
- Low interest rates start at 6.90 per cent per annum.
- Repayment period of up to 15 years or until age 70
- A processing fee of between Rs.10,000 and Rs.15,000 is charged.
- By the age of 70, the loan must be repaid.
- Individuals over the age of 50 who are already working but have a pension plan are also eligible to apply.
- SBI Privilege Home Loan for Government Employees
- Low interest rates start at 6.95 per cent per annum.
- There is no payment charge.
- Loans with a maximum term of 30 years are available.
- Women’s borrowers would benefit from lower interest rates.
- When a checkoff is given, interest is reduced.
- Axis Bank NRI Home Loan: Best for NRIs
- Attractive interest rates begin at 6.90 per cent per annum.
- Loans with a term of up to 25 years are available.
- Documentation is minimal, and funds are disbursed quickly.
- Production charges are kept to a minimum.
- There are no fees associated with the foreclosure.
- HDFC Ltd. Home Loan for Purchase
- Low-interest rates start at 6.75 per cent per annum.
- Loans with a term of up to 30 years are available.
- A fee of up to 0.50 per cent of the loan amount can be charged as a processing fee.
- Through an alliance with AGIF, special arrangements have been made for Indian army personnel.
- Expert legal and professional advice is available.
- Indiabulls Housing Finance Loan for Construction
- Attractive interest rates begin at 8.75 per cent per annum.
- Repayment plans that are flexible
- A processing fee of up to 2% of the loan amount may be charged.
- There are no fees for paying in advance.
- Full loan processing on the website or via a smartphone app.
Home Loan Fees and Charges
- Verification Charges: These charges are incurred when lenders conduct verification procedures to authenticate the borrower’s information. The cost of verification varies among lenders.
- Processing Fee: This fee covers the expenses associated with credit appraisal and is based on factors such as the borrower’s credit profile, income, and the specific home loan scheme. Not all lenders charge a processing fee.
- Administrative Fee: Some lenders split the processing fee into two parts, and the portion charged after loan sanction is referred to as the administrative fee.
- Foreclosure/Prepayment Charges: These charges are applicable when a borrower fully or partially repays the home loan before the loan tenure ends. While RBI has banned prepayment penalties on floating rate home loans, certain lenders may still impose these charges on fixed-rate home loans.
- Repayment Mode Related Charges: If borrowers request a change in their existing repayment mode during the loan tenure, lenders may levy charges for this service. The fee amount typically ranges up to Rs. 500 per swap and varies across lenders.
- Rate Conversion/Switching Fees: When borrowers request their lenders to switch or reduce their existing interest rates for various reasons, they may be charged a fee. This fee varies among lenders and is usually a percentage of the outstanding principal amount, often up to 2%.
- CERSAI Charges: Lenders visit the Central Online Security Interest Registry of India (CERSAI) to verify if the pledged property is claimed by any other lender. Lenders pay a nominal fee for this verification process, which is later collected from the borrowers.
- Overdue Charges on EMI: If a borrower fails to make timely payment or delays in paying loan EMIs, lenders impose overdue charges in the form of penal interest rates on the outstanding dues or overdue installments. It is crucial for borrowers to ensure timely repayment.
- EMI Bounce Charges: When a borrower’s bank account lacks sufficient funds and results in a failure to make a timely loan payment, lenders typically levy EMI bounce charges. These charges vary among lenders, with a common amount being Rs. 500 per default.
- Franking Fee/Stamp Duty Fee: This fee is imposed by the state government on monetary transactions involving the transfer of property rights. It is a tax collected during property transactions.
FAQ’s About Home Loan