Compare the lowest home loan interest rate starting from 6.40% p.a. and apply for the best home loan. Get the complete list of current housing loan rate of interest in India from all leading banks and financial institutions.

As part of the upcoming festive season in the country, leading banks are offering special home loan offers to attract customers to avail home loans. State Bank of India is offering attractive interest rates starting at 6.90% p.a. for home loans of up to Rs.30 lakh and 7.00% p.a. for home loans above Rs.30 lakh. Those applying through the bank’s YONO mobile application get an additional interest rate concession of 5 basis points. Applicants across 8 metro cities in India will get a concession in interest rate of 20 basis points for home loans of up to Rs.3 crore. In the rest of the country, this will be applicable for home loans ranging from Rs.30 lakh to Rs.2 crore. For home loans of above Rs.75 lakh, there will be an interest rate concession of 25 basis points. All interest rate concessions are also linked to the credit scores of applicants.

HDFC Ltd. has announced a blockbuster festive offer for home loans. As a part of the campaign, home loans can be availed at rates of interest starting at 6.70% p.a. The EMIs start at just Rs.646 per lakh for loans up to 30 years. Under this campaign, the processing fee for the loans will be limited to Rs.3,000 (plus taxes) for employed individuals and Rs.5,000 (plus taxes) for self-employed individuals. All HDFC home loans are at the sole discretion of HDFC Ltd. Terms and conditions apply.

Bank of Baroda has cut the repo rate that is linked to the external benchmark by 15 basis points. The reduction in the interest rate has seen the home loan rates start at 6.50%. The Bank of India and Central Bank are now offering home loans at low interest rates. These home loans start at 6.75% p.a. and LIC Housing Finance offers home loans which start at 6.90% p.a. Now, India has five housing finance companies which offer home loans below 8% p.a.

In general, home loans are long-term loans and it is important to figure out your overall interest liability towards the loan at the first place. You can calculate the same using one of the two methods listed below:

EMI Calculator: You can calculate the interest amount applicable to your home loan by simply using a home loan EMI calculator. You will be required to fill up the fields provided on the calculator with the following details –

Once the details have been fed, you can click on the ‘Calculate’ button to get a detailed breakup of your loan including the amount payable towards interest.

EMI Calculation Formula: Alternatively, you can also use the following formula to calculate your EMI liability for your home loan-

Wherein, P is Principal, r is rate of interest, and n is number of instalments or loan tenure in months.

How to Calculate the Effective Interest Rate?

The applicable interest rate on home loan consists of two components, the base rate and markup rate. The combination of two is what you will be paying on the loan. Let's explore these components to give you a better understanding.

Base Rate: It is the standard lending rate of the bank, applicable for all retail loans. This rate is subject to frequent changes on the basis of multiple inputs.

Markup: This component of a small percentage is added to the base rate to arrive at the EIR (Effective interest rate) for a specific type of home loan and varies from one type to another.

Effective Interest Rate (EIR) = Base Rate + Markup

From April 2016 onwards, the Reserve Bank of India (RBI) has mandated a new method for computing lending rate to replace the base rate system. The Marginal Cost of Funds based Lending Rate (MCLR) is aimed at bringing more accountability and flexibility to the way rates are published by banks and financial institutions in India. RBI mandates banks to fix the interest rate after studying the risk factor associated with lending to borrowers. It takes into account, various factors involved such as repo rate, deposits etc. This MCLR based computation works out to be slightly lower than the erstwhile base rate.

Types of Interest Rates in Home Loan

There are mainly two types of home loan interest rates charged by most of the banks.

In this system of computation, the rate remains even throughout the loan tenor. There will be no change in the interest charges since the rate remains fixed. Depending on the offer, you may be allowed to switch over to the floating rate system after completing a certain duration into the loan tenure.

Advantage: Since the rate remains fixed, you know how much interest charges you’re paying upfront. Your loan will be shielded from frequent rate fluctuations and saves money in a longer run if there is a hike in lending rates.

Disadvantage: If the standard lending rates fall, you will not benefit since the interest component remains frozen.

Read More: Fixed Home Loan Rates

The interest charges on your home loan is subject to the current most lending rates of the bank. The rate is linked to the latest published rate of the bank which in turn depends on multiple factors such as RBIs monetary policy and lending rate revisions, the bank’s response to the revision etc.

Advantage: The most visible perk of opting for the floating rate is that you have the advantage of being billed on the basis of the latest rate. If the rates fall, you save on interest charges.

Disadvantage: In rare scenario, if the standard rates go up, the loan has to be bear the brunt of being billed a higher rate.