Last Updated on Jun 28, 2023 by Harshit Singh
For most people, owning a home is a dream, an expensive dream. Making your dream come true requires a lot of work, including finding the best bank for a home loan that can support you financially to fund this dream. To make the research easier for you, in this blog we have listed down the best bank for home loan along with all the essential details that you should know and follow before applying for a home loan in India.
Table of Contents
What is a home loan?
A home loan is a sum of money a person borrows, especially from banks and private lending institutions, for building a home. Against a home loan, the borrower has to repay the loan plus interest that depends on the tenure of your loan in Easy Monthly Instalments (EMI).
Best home loan interest rates of banks – 2023
Below listed are the banks with the best home loan rates –
| Banks | Starting Interest Rate (p.a.) | Processing Fees | Tenure (yrs) |
| Kotak Mahindra Bank | 8.85% – 9.40% | Rs. 10,000 | 1-20 yrs |
| Union Bank of India | 8.70% p.a. onwards | Up to 0.50%(Max Rs. 15,000) | 1-30 yrs |
| Bank of Baroda | 8.60% – 10.60% p.a | Up to 0.50% (Min. Rs. 8,500; Max. Rs. 25,000) | 1-30 yrs |
| State Bank of India | 9.15% to 9.65% | 0.35% of the loan amount (min. Rs. 2,000; max. Rs. 10,000) | 1-30 yrs |
| HDFC Home Loans | 8.60% p.a. onwards* | 0.5% or Rs.3,000 whichever is higher | 1-30 yrs |
| Axis Bank | 8.75% p.a. onwards | Up to 1% or min. Rs. 10,000 | 1-30 yrs |
| Canara Bank | 8.85% p.a. onwards | 0.50% (min. Rs. 1,500 and max. Rs. 10,000) | 1-10 yrs |
| Tata Capital | 9.15% p.a. onwards | 0.50% | 1-30 yrs |
| Bandhan Bank | 8.65% p.a. onwards | 1% (Rs. 5,000) | 1-30 yrs |
| Yes Bank | 8.95% p.a. onwards | 1% (Rs. 10,000) | 1-30 yrs |
In comparison – Home loans in India
| Category | Bank |
| Lowest home loan Interest rate | Bank of Baroda (8.60%) |
| Lowest home loan tenure | Kotak Mahindra Bank (20 yrs) |
| Lowest home loan processing fees | HDFC Home Loans (0.5% or Rs.3,000) |
5 factors to consider while applying for a home loan
A few things to keep in mind while evaluating home loans from banks are –
- Total EMI amount
A home loan consists of both principal and interest amount, which you have to repay monthly in the shape of instalment at a decided tenure. Considering your financial capability, you can decide on the amount which will dictate the tenure.
- Duration
Deciding on the course of the duration is important as the more lengthy the duration, the more you have to pay the interest on the principal amount. Therefore, decide the length of tenure you will take to repay the loan.
- Rate of interest
The principal amount of a home loan determines the interest rate. Therefore, selecting the bank with the best home loan rates is essential. The lower the loan amount, the lower will be the interest rate.
- Initial payment or down payment
The sum you will contribute to building a home is called the down payment. Putting down as much capital as possible to lower the home loan without straining your finances is advisable.
- Additional fees
Administrative fees such as processing or service fees that banks impose on home loan borrowers exist in addition to the EMIs. Therefore, review these additional fees with the lender before applying for a loan.
Eligibility criteria for home loan
To be eligible for a home loan, the banks lay down certain criteria –
| Eligibility Criteria | Requirement |
| Age | 18 yrs – 70 yrs |
| Resident Type | The applicant must be (any one):Resident IndianNon-Resident India (NRI)Person of Indian Origin (PIO) |
| Employment | The applicant can be (any one):SalariedSelf-employed |
| Net Annual Income | At least Rs. 5-6 lakh |
| Residence | The applicant should be (any one):A permanent residenceA rented residence where he/she has resided for at least a year prior to applying for a loan |
| Credit score | At least 750 |
Documents required for a home loan
While applying for a home loan, keep these documents handy –
| Category | Documents |
| Identity Proof | Driving licencePANVoter IDValid passport |
| Income Proof | Bank account statements of the last six monthsSalary slips for the last three monthsCopy of Form 16 or Income Tax Returns for the last two years |
| Residence Proof | Electricity billWater billAadhar cardDriving licenceValid passport |
| Other documents | Loan account statement for the previous 12 months if the applicant has any other ongoing loan from other banks/financial institutions |
In conclusion, getting a home loan may sound as easy as it looks, but finding the best suitable repayment plan is a hassle that one must consider while evaluating home loan options. Also, the banks charge a marginal percentage of the home loan as a processing fee, but that shouldn’t be your point of worry as most banks charge a little high on processing fees but come with feasible EMI plans for home loan repayment. Therefore it is advisable to take the help of an expert to come up with the best home loan repayment plan.
FAQs
- What does “home loan interest rate” refer to?
The home loan interest rate signifies the percentage the lender charges the borrower for utilising the principal amount. It determines the cost of the home loan, and when paying the equated monthly instalment (EMI), the interest rate affects the monthly repayment to the lender. The interest rates are typically tied to the repo rate and can differ among various lenders.
- How to obtain the lowest home loan rates in India?
Given that home loan interest rates are at a 15-yr low, most banks offer lower rates than the previous financial year. To secure the lowest home loan interest rates, comparing the rates offered by different lenders is advisable.
- How to reduce the interest on a home loan?
Opt for a shorter tenure: Selecting a shorter repayment period for your home loan can significantly decrease the overall interest cost. Although the monthly instalment might be higher, the total interest paid over time will be considerably lower.
As an investment fanatic, I’ve dabbled in early-stage startups, mutual funds, gold, stocks, smallcases, and real estate to identify which assets generate the highest ROI. At Tickertape, I’m dedicated to presenting my learning and providing insightful suggestions to help my readers make sound investment decision.
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