Home Loan

Last Updated 04th Jul 2020

Housing Loan Apr 2020

  • Home Loan is long term credit offered by banks to home buyers to help them purchase their dream house against the collateral of the home purchased.
  • Instant Home Loan are pre-approved home loans in which the loan amount is decided based upon your income levels and repayment capacity.
  • Currently, lowest home loan interest rates starting @ 6.85 %.
  • Housing loan can be availed up to a tenure of 30 years and up to 90% of the property value.
  • Compare the best online instant home loan offers from top banks in India.
  • Estimate your loan eligibility online with MyLoanCare Home Loan Eligibility Calculator.
  • Apply for home loan online at MyLoanCare and get attractive cashback upto Rs. 1,000.
Apply for Home Loan @ 6.85%* Get upto ₹ 1,000* Cashback

What is Home Loan?

A home loan is a credit facility which is provided by banks and NBFCs in which you place the property you want to buy as collateral with them in exchange of the required funds you need to buy that property. Most of the banks finance home loans up to the maximum limit of 90% of the property’s value and these funds are provided against the security of that very property for which you have sought finance. Along with the banks, the Central and State Governments offer various housing schemes to encourage “Housing to All” by the end of the year 2022.

Top Banks of Home Loans in India

Bank Interest Rates Lowest EMI Per Lakh for Maximum Tenure
SBI Home Loan 6.95% Rs. 662 for 30 years
HDFC Home Loan 6.95% Rs. 662 for 30 years
Bank of Baroda Home Loan 6.85% Rs. 655 for 30 years
Citibank 7.50% Rs. 739 for 25 years
ICICI Bank 8.10% Rs. 741 for 30 years
Axis Bank 7.70% Rs. 713 for 30 years
PNB Housing Finance 8.60% Rs. 776 for 30 years
LIC Housing Finance 7.50% Rs. 699 for 30 years
Indiabulls 9.25% Rs. 856 for 25 years
DBS Bank 7.70% Rs. 818 for 20 years
DHFL 9.50% Rs. 841 for 30 years
Kotak Bank 8.60% Rs. 874 for 20 years
IDFC First Bank 9.50% Rs. 841 for 30 years
Canara Bank 8.05% Rs. 737 for 30 years
LT Housing Finance 9.90% Rs. 870 for 30 years
UCO Bank 6.90% Rs. 659 for 30 years
Reliance Capital 10.00% Rs. 878 for 30 years
OBC 8.00% Rs. 772 for 25 years
Jammu And Kashmir Bank 7.70% Rs. 938 for 15 years
IDBI Bank 8.25% Rs. 751 for 30 years
Federal Bank 8.35% Rs. 758 for 30 years
Dhan Laxmi Bank 8.85% Rs. 890 for 20 years
Bajaj Finserv 8.45% Rs. 865 for 20 years
Corporation Bank 8.35% Rs. 758 for 30 years
Tata Capital 9.05% Rs. 808 for 30 years
Bank of Maharashtra 8.20% Rs. 748 for 30 years
United Bank of India 8.00% Rs. 734 for 30 years
Andhra Bank 8.15% Rs. 744 for 30 years
Syndicate Bank 8.00% Rs. 734 for 30 years
Standard Chartered Bank 9.40% Rs. 926 for 20 years
RBL Bank 10.45% Rs. 941 for 25 years
PNB 7.15% Rs. 675 for 30 years
Karur Vysya Bank 8.20% Rs. 785 for 25 years
Indian Overseas Bank 7.45% Rs. 696 for 30 years
HSBC Bank 8.65% Rs. 815 for 25 years
Edelweiss 10.50% Rs. 944 for 25 years
DCB Bank 10.24% Rs. 981 for 20 years
Piramal Housing Finance 9.00% Rs. 805 for 30 years
Central Bank of India 7.25% Rs. 682 for 30 years
Yes Bank 9.85% Rs. 898 for 25 years
Bank of India 7.25% Rs. 682 for 30 years
Union Bank of India 8.25% Rs. 751 for 30 years
Allahabad Bank 8.25% Rs. 852 for 20 years
South Indian Bank 8.05% Rs. 737 for 30 years
Punjab and Sind Bank 8.05% Rs. 737 for 30 years
Lakshmi Vilas Bank 9.70% Rs. 945 for 20 years
Karnataka Bank 8.55% Rs. 772 for 30 years
Indian Bank 7.55% Rs. 809 for 20 years
GIC Housing Finance 10.25% Rs. 982 for 20 years

Housing Loan Benefits

The government has announced various home loan subsidy schemes like PMAY to encourage the availability of home loan. Recently, RBI has linked home loan interest rates to repo rate and hence, been constantly reducing the repo rate consecutively in the last few monetary policies to ensure availability of easy loans. However, availing a home loan is a major decision, and you should develop a complete understanding of it before making any decision.

Some features of home loan which makes it a wise decision to take for any borrowers looking to purchase a house are:

  • Easy availability: All leading banks and NBFCs offer attractive housing loan schemes. Rates and features of home loan schemes today in India are customer friendly, making them a good choice for borrowers.
  • Multi-Purpose: Housing loans are multi-purpose loans available for buying a new residential flat or building, for constructing a new house on a plot, home renovation or for extending your current house.
  • Long Tenure: Since the amount of loan borrowed is high, the tenure to repay that loan can go up to as high as 30 years, which allows the borrower to choose an affordable EMI and ensure that his monthly budgets are not under any kind of pressure.
  • Prepayment and Foreclosure: The facility of paying more than your EMI and even repaying the complete loan before the end of tenure is also an essential feature of home loan. RBI doesn’t allow banks and NBFCs to charge any fee or penalty on prepayment or foreclosure of a floating rate home loan.

Some of the notable benefits of taking a housing loan rate.

  • Save Rent: By opting to buy your house using a housing loan, you will be saving the rent that you pay for a rented accommodation.
  • Tax Benefits on Housing Loan: The housing loan has attractive tax benefits associated with it. A deduction of up to Rs. 1.5 lakhs is available under Section 80C for repayment of the principal amount. A deduction of up to Rs. 2 lakhs is available for the interest amount accrued in a financial year on home loan under Section 24.
    In addition, in the Budget of 2019-20, a new section was introduced, i.e., Section 80EEA. Under this, an additional deduction on interest of the home loan is provided if the housing loan is availed between 1st April 2019 to 31st March 2020, and the stamp duty value of the property is Rs. 45 lakhs or less. However, in the Budget 2020-21, the time limit of the loan was extended from 31st March 2020 to 31st March 2021.
  • Tax Benefits on Second Home: In case you have availed a housing loan to buy a second house, the entire interest amount accrued on that loan for a financial year is available for deduction without any ceiling limit under Section 24B.
  • Affordable: Housing loans are affordable as the interest rate is very low in case of home loans and repayment can be done in easy affordable EMIs.
  • Appreciation of Capital: Over a period of time, the value of property increases. Thus, your investment in your home through the home loan will reap you benefit in terms of having a high-value asset as well.

Home Loan Procedure

The home loan process starts with calculating your EMI and eligibility before doing a detailed comparison of offers and schemes of leading banks and NBFCs in India.

Step 1 : Check Eligibility and Calculate EMI
Before you apply for a housing loan, check your loan amount eligibility and calculate monthly EMI that you can comfortably service. Home loan eligibility is calculated based on age, monthly income, current obligations, LTV ratio, property type and other factors. EMI can be calculated based on loan amount, interest rate and tenure. Shortlist the banks which offer the maximum loan amount once you check your EMI and eligibility.

Step 2 : Check Legal Documents and Property Approval Status
In case you are buying a builder property, then check for the banks who have approved the shortlisted projects. In case of a resale property, map plans are to be approved and ensure that the property registration documents are accurate from the first owner to the current owner. Shortlist the banks who give loan on your selected property.

Step 3 : Decide on Home Loan Interest Rate Type

  • Choose between floating and fixed rates: Most of the banks offer home loans at floating and fixed interest rates. Fixed interest rates are higher than floating rate loans. In fixed rates, the interest rate remains constant during the loan tenure. In floating rate loans, the rates change after periodic intervals in response to MCLR, PLR and external benchmarks like RLLR and TBLR. Do a home loan interest rates comparison before you apply for a home loan.
  • Home saver loan option: Banks offer overdraft facility to save interest on home loan. A surplus amount can be deposited in the loan overdraft account as and when available with an option to withdraw the amount anytime. The interest rate on overdraft loan is higher than regular home loans.
  • You can also evaluate a mortgage guarantee home loan as it covers any default risk and allows the lender to give you a loan at a low rate of interest. You will however need to pay a mortgage guarantee fee to the bank.

Step 4 : Compare Shortlisted Banks
You can compare home loan interest rates of all banks and NBFCs at online marketplace like myloancare.in. Along with rates, check processing fee, prepayment charges and any other associated cost on loan. Compare all the rates and charges to shortlist the banks further and reduce the options to 2-3 banks.

Step 5 : Select the bank based on other service related parameters
Finally, as you decide to take the loan, also consider other services and related transparency parameters of the chosen banks. Some of these factors are turnaround time, quick loan delivery, doorstep services, transparency in the loan process. You also need to understand the trends and changes in MCLR, PLR and external benchmark rates over some time. Last but not least, read reviews of existing customers on banks on their services, interest rates and transparency to take your decision to borrow from a bank.

Different Types of Home Loan

Many people think that home loan is only available for buying a new property or for construction, but that's not true. There are various types of home loan available catering to a variety of requirements. These are as follows:

  • Home Purchase: The most common home loan type is the loan which is availed to buy a residential property, it can be a house or a flat. The maximum financing available for it is up to 90% of the property's value.
  • Home Improvement Loan: If you already own a house but don't have enough funds to renovate it, then Home Improvement Loan is best suited for you. It includes works like repair, painting the walls, rewiring, waterproofing, etc.
  • Home Extension Loan: You can also avail a loan for expanding or extending your current house. Some lenders have curated a separate loan product for this purpose, while some of them include this purpose as part of their home improvement loan product.
  • Home Construction Loan: Housing loan is also available for those who want to construct their own house. Although their certain aspects which you need to keep in mind in this case, they are;
    • The land or the plot on which the house is to be constructed should have been bought within a year.
    • If you do not include the cost of the plot in loan amount, then only the cost of construction would be estimated.
    • A rough estimate of the cost has to be made for the cost that will be incurred in construction.
  • Loan for Land Purchase: Banks and NBFCs also provide loans for buying a plot on which an individual is looking to construct their own house. Usually, the maximum financing for plot loan is done up to 70-80% of the value of the land.
  • Home Loan for NRI: Home loan is also available for the non-resident Indians who want to buy their own house in India. The structure of this loan is similar to a regular housing loan. However, the documentation part is comparatively lengthy.
  • Joint Home Loan: This type of loan is taken with a co-applicant to increase the eligibility of the loan. You can add an earning member of your family like parents, spouse or children as co-applicant. Banks allow a maximum of 6 co-applicants for a joint home loan.
  • Affordable Housing Loan: PMAY scheme was launched by the Modi Government in 2015 to provide affordable housing to the urban poor by 2022. Under this scheme, applicants are eligible for interest subsidy if they take a loan to buy or construct a house.
  • Top-Up Loan: After a certain period of time, you can also opt for a top-up loan on your home loan. A top-up is an additional loan amount that is borrowed in between the home loan tenure for varied purposes like, home renovation, meeting an emergency, etc.
  • Balance Transfer: In case of a housing loan you can also transfer your balance from your current lender to another lender if the rate you are paying on your loan is significantly higher than the market rate. So you don’t need to worry about being stuck with a high cost home loan.

CIBIL Score for Home Loan

Most of the banks or NBFCs consider a score above 700 as a good score. When you apply for a home loan, the bank first checks your credit history and repayment capacity. If you have a low credit score, bank might reject your housing loan application. However, if you have a good credit score, the chances of approval of the application are very high.

How to Get instant Approval on Home Loan?

While there is no product like an instant home loan, many banks and NBFCs have an attractive housing loan product which is called an instant home loan or pre-approved home loan product. It is provided by lenders mostly to those who are existing customers. Under this scheme, the amount of home loan you are eligible for is calculated based on your income level, credit score, and FOIR. The sanction letter on such loans is valid for a period of up to 6 months. In this period, you can finalize a property and get the amount disbursed. The bank only do a legal and technical evaluation of the property before giving a final approval and disbursing the loan. This pre-approved home loan offer allows buyer to take an instant decision to purchase a property without the need to worry about arranging funds. It also gives you the idea of how much loan you can get and based on that you can search for the right house. Further, it gives a comfort to the seller about your intent and ability to complete the home property transaction.

The steps to get a pre-approved home loan are very simple:

  • You can enquire in the bank with which you have your savings or salary account, whether they have such a product or not.
  • If Instant home loan is available, then you can apply for it right away through their website or by visiting the branch.
  • After you apply and submit the required documents, within a couple of days, you will be issued a pre-approved home loan sanction letter which details out the loan amount, interest rates, tenure, validity of the offer and other terms and conditions.

Home Loan Rejection

Do’s Don’t
Always pay your ongoing EMIs on time so that your credit score never drops. Never apply for the home loan just for the sake of it.
Check your credit score regularly and apply only when it's at least above 650. While filling your application form for the home loan, make sure all information is correct and complete, and they match your relevant documents.
Proper research is a must before you apply with any lender for a home loan. Don’t just blindly apply with the bank in which you have an existing account because of the previous relationship.
You should have stable employment before you opt for a home loan. Make sure you are not defaulting on your current EMIs or accumulating too much credit on your credit card.
Read the fine print of the document carefully before signing it. Don’t blindly sign any document before you have read all its terms and conditions.
Make sure you submit all the necessary documents along with your loan application. Do not apply for a home loan if you already have a number of ongoing loans.
Assess your financials and eligibility and apply for the loan that you are probably going to be eligible for. Do not apply for the home loan in multiple banks at the same time.
Make sure to check the charges applicable for prepayment and foreclosure. Choose your loan tenure wisely. Putting a random number for your tenure can cost you in the long run.

Avail Home Loan in Your City

FAQs- Home Loan

How can I apply for home loan?

You need to submit a home loan application to the shortlisted banks to initiate the process of taking a loan. Home Loan application can be submitted by directly visiting the bank’s branch or by applying at the bank’s website. You can also check and compare the best home loan interest rate of all banks online at MyLoanCare and apply for a loan to multiple banks simultaneously to get deal.

How can I apply home loan in my city?

Nowadays, people living in any part of the country can apply for a loan with all leading banks and NBFCs by walking in to the nearest bank or by applying online at the bank’s website or other loans websites.

Can I get a home loan without ITR?

Many banks have launched schemes to provide home loans without ITRs for borrowers who are self employed and are looking to buy affordable houses. HDFC Reach is once such popular scheme which provides loan with lesser documentation, but charge higher interest rate of 9.25%.

Which bank home loan is best?

Most top banks have similar eligibility criteria and interest rate, along with other terms and conditions. No one bank stands out from the rest. However, you can assess the features of various bank’s home loans and decide which one is suitable for your needs better.

How does the home loan work?

To get a home loan, you need to first apply for it and also pick the property you want to buy. When your home loan application gets accepted, then you can show that to the seller who will then get an appointment with the registrar. As the appointment gets fixed, you along with the seller and a bank representative go to the office for registering the property on your name. The property documents are handed to the bank right there, and within a day or two, the loan amount is disbursed as well.

Can I get a 100% home loan?

No, the maximum funding allowed by RBI for a bank to extend on a home loan is 90% of the property’s value.

Which bank gives the cheapest home loan?

Currently, the lowest interest rate on a home loan is offered by Bank of Baroda, which is 6.85%.

When should I apply for a home loan?

You can apply for a home loan when you have picked the property of your choice and also have the amount ready for the down payment, which can vary between 10-20% of the property’s value.

Which loan is best for buying a home?

If you are looking to buy a house, availing a home loan is the best option considering its lower rate of interest, long tenure, and no charges on prepayment.

What is the minimum salary for a home loan?

The minimum salary required to apply for a home loan is Rs. 25,000. Banks offer discounted rates for borrowers with low income looking to buy affordable houses. In fact in the current situation, rate of interest is lower if the value of property one is looking to purchase is less than Rs. 30 lakh.

Can we pay our home loan early?

Yes, every lender has to abide by RBI prepayment rules and provide an option of prepayment and foreclosure of a floating rate home loan without charging any fees or penalty. So, if you happen to get the required funds to pay your home loan early, you can certainly do so. However, if you have a fixed rate home loan, banks and lenders may include a clause in the home loan agreement explaining the various condition and charges for home loan prepayment and foreclosure.

What kind of loan is a home loan?

A home loan is a secured loan in which the property to be purchased is given as collateral by the borrower to the bank.

Home Loan News - Jul 2020
*Terms and conditions apply. Credit at sole discretion of lender subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and from collected from public sources. Read More
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