Top Home Loans for 2022

June 27, 2022

Read the given below list of banks that offer the best housing loans in India along with their interest rates and processing charges. This home loan bank list can guide you toward choosing the best bank for housing loans.

Banks Rate of Interest (p.a) Processing Charges
Kotak Mahindra Bank 7.00% to 7.60% 0.50%
Citibank 6.75% Rs. 10,000
Union Bank of India 6.90% NA
Bank of Baroda 6.90% to 8.25% Contact the bank for information
Central Bank of India 6.85% Rs. 20,000
Bank of India 6.90% NA
State Bank of India 7.05% to 10.85% 0.35% onwards
Axis Bank 6.90% Rs. 10,000
Canara Bank 7.05% to 9.30% 0.50% of the loan amount (minimum of Rs. 1,500, and a maximum of Rs. 10,000)
Punjab and Sind Bank 6.85% Full Waiver
IDFC First Bank 6.50% Rs. 5,000 to Rs. 5,000
Bandhan Bank 6.40% -13.50% 1% (Rs.5,000)
Yes Bank 8.95% 1% (Rs. 10,000)
Punjab National Bank 6.50% 0.35% (Max Rs. 15,000)
United Bank of India 8.00% 0.59% (Rs. 1,180 – Rs. 11,800)
UCO Bank 6.50% 0.15% (Rs. 1,500 – Rs. 15,000)
DBS Bank 7.30% 0.25% (Rs. 10,000)
IDBI Bank 6.75% 0.50% (Rs. 2,500 – Rs.5,000)
HSBC Bank 6.45% 1% (Rs. 10,000)
Tamilnad Mercantile Bank 8.25% Rs. 15,000
Jammu and Kashmir Bank 7.20% Rs. 500 to Rs. 10,000
South Indian Bank 7.85% 0.50% (Rs. 5,000 – Rs. 10,000)
Hudco Home Loan 9.45% NA
Dhanlaxmi Bank 7.85% Rs. 10,000
Karur Vysya Bank 7.20% Rs. 5,000
Federal Bank 7.65% Rs. 3,000 to Rs. 7,500
Standard Chartered Bank 7.99% 1%
Karnataka Bank 7.50% Rs. 250
Indian Overseas Bank 7.05% 0.50% (Max Rs. 20,000)
Bank of Maharashtra 6.80% Rs. 10,000

You can also check the listed housing finance companies in India the given below table. This home loan bank list can help you in wisely selecting the best housing loan in India.

Housing Finance Corporations (HFCs) Rate of Interest (p.a) Processing Charges
PNB Housing Finance 6.99% Up to 0.50%
Aavas Financiers 8.00% 1.00%
Sundaram Home Finance 6.95% Rs.3,000 (for salaried)
Tata Capital 6.90% 0.50%
Indiabulls 7.60% 0.50% onwards
HDFC LTD 7.55%* 0.5% or Rs.3,000 whichever is higher
Aditya Birla 9.00% 1%
GIC Housing Finance 7.45% Rs. 2,500
Reliance Home Finance 9.75% Rs. 3,000 – Rs. 6,500
Shriram Housing 8.90% NA
India Shelter Finance 12.00% 2.00%
IIFL 10.50% 1.25%
DHFL Housing Finance 8.75% Rs. 2500
Saraswat Bank Home Loan 6.70% NA
LIC Housing Finance 6.90% Rs. 10,000 -Rs. 15,000

How to Choose the Best Bank for Home Loan?

To choose the best bank for a home loan in India, make sure to tick mark the checklist mentioned below:

Interest Rate

Most banks offer competitive interest rates. Thus, it is better to check and compare the home loan from different banks and HFCs. Once you are firm with the comparison, you can proceed further. 

Processing Fees

Make sure to compare the processing fees of the best banks. It is because every bank has a different processing fee and some of them even have some hidden costs. 

Longest Tenure

All the banks offer different tenures. The maximum repayment tenure available with banks and HFCs varies between 20 to 30 years. The tenure you choose decides the interest rate of your loan and monthly EMIs. 

Affordability

As an applicant, you should consider the loan amount carefully. Make sure the loan is as per your repayment capacity. Therefore, it is important to consider affordability before choosing the best bank for home loans. 

Pros and Cons of Banks

You must consider the pros and cons of each and every bank and HFC while applying for the best home loan. Further, make sure to check the history of the bank, its interest rate, and financial stability over the past few years. 

Flexible & Extended Repayment Options

Most lenders offer different options for repayment. It is because flexible repayment helps the debtor in reducing the EMI burden. You can choose one of the most convenient popular repayment schemes mentioned below:

An Accelerated Repayment

If your salary increases, you can pay a small principal amount apart from EMI. This will help you in clearing your long debt quickly and at an early stage. Making these pre-payments will help them in saving the interest component of the loan. 

Step-up and Step-Down

In this repayment option, the EMIs amount first decreases and then increases as the tenure year passes. In the initial years, it is low and with each passing year, the monthly EMI amount increases. This repayment option is known as the step-up repayment process. This is best suited for people who have recently started earning.

However, in the step-down repayment option, the EMIs are high during the initial years and decrease with each passing year. This step-down repayment option is best suitable for people who are close to retirement or earning good money currently.

Balloon Repayment Scheme

In this kind of repayment option, you can pay lower EMI in the initial years. It is called the balloon repayment scheme because at the time of loan maturity you have to pay around 30% to 40% of the principal loan amount. 

With these flexible repayment options, you can borrow the amount and repay it at your convenience. Thus, select the most suitable repayment option to get the best home loan.

Fee Payable on Rate Conversion

The basic fee payable on rate conversion is 0.5% only on the outstanding principal amount.  However, these rates depend on the bank’s discretion. Apart from the basic fee, there are a few other charges as well which have to be paid by the borrower. 

Check Prepayment Norms Carefully

If you prepay the home loan after the time of six months, you have the choice to prepay up to 25 percent of the principal amount. However, an amount above 25% is chargeable. Most banks charge up to 2% of the loan amount but this value varies for every bank. Further for floating interest rates, there are no prepayment charges. 

Types of Home Loans

The Indian banks offer several types of home loans. You can choose the best home loan depending on your requirement and convenience. 

For Buying a Home

If you want to buy a completely furnished house then you must opt for a home loan for buying. The banks and HFCs offer a loan amount of up to 85% of the value of the house you are planning to buy. 

For Building a House

When you apply for a loan for constructing a house, you have to provide the borrower with a construction plan. This construction plan includes every detail, cost, and other procedure required to build a home. Further, the bank reviews the application and decides whether to disburse the loan amount or not. For construction loans, the entire amount is not provided by the lender. The loan amount is disbursed in small amounts.

For Buying Land

There are several people who want a home loan for purchasing the piece of land either with the prospect of construction in the future or as an investment. Several banks in India offer loans with a maximum of 85% of the land cost. The other 15% will be given by the down payment to the borrower.

For Renovation or Development of a House

This type of home loan is available in a few HFCs and banks. Here the applicant can take a loan for renovating or expanding their house. However, only a percentage of property value will be provided by the banks. 

Types of Interest Rates

Before you choose the best bank for a home loan, it is important for you to know the interest rate and its type. It is because interest rate plays a crucial role when it comes to home loans. 

The interest rate is decided by the banks and is dependent on the loan type, credit score, and the repo rate given by RBI (which are increasing to decrease the inflation rate). Therefore, a higher interest rate means the loss of the debtor. To prevent this loss, banks and HFCs often give the applicant the option of choosing from the following types of interest rates.

Fixed Interest Rate

The main factor that affects the interest rate is the tenure of the home loan. If you choose a fixed interest rate, then you will have a constant interest rate throughout the tenure. However, you are allowed to change their fixed interest rate to a floating interest rate after a specific time has passed. 

A fixed interest rate is beneficial as the EMIs remain the same. There will be no effect if the interest rate changes or fluctuates in the market. The only loss the debtor has to incur is if the interest rate decreases, you will not be able to avail of its benefit. 

Floating Interest Rate

The floating interest rate keeps on changing as per the fluctuations in the market. It is dependent on the RBI guidelines on the repo rate. These rates are revisable at any time. It is advantageous to the debtor as the interest rate can reduce if the repo rates decrease. But a constant risk of increasing rates is present. 

How to Calculate EMI for Best Home Loans?

Calculating EMI for getting the best housing loan in India is not a complex task if you use the Urban Money calculator. This calculator is advanced and informs you about every information in detail regarding every month’s EMI. The EMI home loan calculator uses the following formula to provide you with accurate data:

EMI Amount = [P x R x (1+R)^N]/[(1+R)^N-1]

In this formula, P, R, and N are variables. Here,

P stands for Principal loan amount. This loan amount is the original loan amount given by the bank. Further, the interest is calculated on this principal amount.

R means the interest rate on which the bank provided you with the loan. 

N is the tenure years or years of repayment you have taken to repay the loan amount. Since EMIs are payable each month, the tenure is calculated as months, not years. 

For instance, Mr. Kumar took a home loan in India for Rs. 50,00,000 with a rate of interest of 12% p.a. And he selected ten years or 120 months as the tenure of repayment. Therefore, the estimated EMI will be:

P = 50,00,000

R = 12/100/12 or 0.1

N = 120 months (converting 10 years to months)

EMI Amount = [5000000 x 0.01 x (1+0.01)^120] / [(1+0.01)^120-1]

EMI Amount = Rs 71,735

Here, Mr. Kumar has to pay Rs 71,735 as monthly EMI to repay the loan of Rs. 50,00,000 in 10 years. 

Eligibility Criteria for Getting Best Home Loan in India

To avail of the best home loan in India, one must adhere to the below-mentioned eligibility criteria: 

Age of the Applicant

During taking the loan the minimum age of the applicant must be 21 years. The maximum age must not be more than  65 years. 

Monthly Income

As a home loan applicant, you must have a steady income if you are a salaried person or have profit returns of two previous financial years as a self-employed individual. A regular source of income ensures the lender about your credibility and reduces the risk of missing repayments. 

Co-applicants

If two people apply for a joint home loan, then the co-applicant must have a steady income that can increase the borrower’s income and increase the home loan eligibility. The co-applicant must have a share in the property, and they should be a direct family member of the primary applicant. 

CIBIL score

You must have a good CIBIL score to be eligible for any type of home loan. Most banks and HFCs consider 750 or more a good credit score. 

Property Value

You must have approval on the property and the builder against which you are taking the home loan. The approval criteria vary depending upon the type of property. 

If you fulfill all these eligibility criteria then you can get a good deal from the best bank for a home loan in India.

Scope for Increased Home Loan Eligibility

The home loan amount is usually defined as the maximum amount bank or HFC can lend you. The scope for increased home loan eligibility depends on the following factors:

  • Before applying for a home loan you must clear out all the existing loans. It is because the previously running loans can negatively impact your home loan eligibility. 
  • The home loan eligibility is dependent on your repayment ability. Selecting a longer tenure can help you in paying lower EMIs and assist banks in earning more interest from you. 
  • Fixed Obligation to Income Ratio (FOIR) is a crucial factor in determining home loan eligibility. FOIR is the part of your source income you are using for loan repayment. If you have a higher FOIR your loan eligibility chances will decrease. Therefore, you must try to limit your FOIR by up to 40% to increase the chances of loan approval. You can lower the FOIR by increasing your income source or clearing all the debt.
  • Before you apply make sure you have a good credit score which is not less than 750 credit score. 
  • Make sure to apply for a joint home loan. Your income and the income of a co-applicant will show a higher income. Furthermore, to get the best home loan in India, a higher income can increase your loan eligibility. 

Things to Consider to Avail Best Home Loans

You can consider the following factors to avail the best home loans in India.

  • The credit score must be 750 or more.
  • Make sure to compare the rate of interest offered by different banks and HFCs.
  • You must opt for shorter home loan tenure.
  • To avail best home loans you can also compare the processing fee of different banks and HFCs.
  • Read all the terms and conditions offered by your home loan provider.
  • Make sure your bank or HFCs do not charge any hidden costs.
  • You should also consider the foreclosure terms for getting the cheapest home loan. It is because banks cannot charge you any penalty for foreclosure if you have chosen a floating interest rate.

Frequently Asked Questions (FAQs)

/[(1+R)^N-1], where P stands for the principal amount, R for the rate of interest, and N is the tenure (variables). The EMI value changes with changes in these variables. Another method to check the total interest payout is using the Urban Money calculator. ” image-4=”” headline-5=”h3″ question-5=”Will home loan interest rates go down in 2022?” answer-5=”With the increasing inflation rate, the Reserve Bank of India increased their repo rates again in June which pushed banks and HFCs to increase their interest rates. Therefore, there is a very slight chance for home loan interest rates to go down in 2022. ” image-5=”” headline-6=”h3″ question-6=”How is Home Loan Risk weighting linked to LTV Ratio?” answer-6=”As per RBI guidelines in October 2022, the home loan risk weight would be 35% if the loan to value ratio is 80% or lower. But if the LTV ratio is 80% and up to 90% the risk weight changes to 50%. ” image-6=”” count=”7″ html=”true” css_class=””]

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