[ecis2016.org] As home loans are a long-term commitment, we offer some tips on how to choose a bank that serves you well throughout the loan tenure
If you are planning to buy a house using a home loan, your first instinct, naturally, is to look for the lowest home loan interest rate. To make a list of best banks for home loans, it becomes important that you compare their home loan interest rates along with additional costs that they impose on you while sanctioning the home loan. This guide will help you get the best home loan, by examining the best home loan rates currently offered by various banks in India.
You are reading: Lowest home loan interest rate: Best banks to get your home loan in 2022
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Lowest home loan interest rate
As the interest charges will always be the single-biggest influence in driving the borrower’s decision, we have listed the banks that offer the lowest home loan interest rate, currently. However, while making the list, we have also determined the banks’ loan affordability, by factoring in the fringe charges. Also note that the rates mentioned in this article are with regard to the floating rate of interest, linked with the RBI’s repo rate and not the previous marginal cost of funds-based lending rate (MCLR) regime, or base rate or prime lending rate regimes.
Lowest home loan interest rate: 1
Union Bank of India
Mumbai-headquartered Union Bank of India was in the news in 2020 when the government merged Andhra Bank and Corporation Bank with it. Currently, this public lender has a network of over 9,300 domestic branches and more than 11,800 ATMs.
Union Bank home loan interest rate
| Rate of interest on home loans | Best rate* | Highest rate** |
| For salaried individuals | 6.40% | 7.0% |
| For self-employed individuals | 6.45% | 6.80% |
*Rate applicable from October 27, 2021.
Longest tenure: 30 years
Processing fees: 0.50% of loan amount, subject to a maximum of Rs 15,000, plus GST
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Affordability scale: High
Advantages: There is no cap on home loan amount at Union Bank.
Disadvantages: When compared to some public lenders, Union Bank has limited number of branches.
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Best banks for home loan: 2
Kotak Mahindra Bank
A fast-growing private lender, the Uday Kotak-headed banks has branched over 100 cities in India. At present, Kotak Mahindra if offering the best rate of interest on home loans in the market.
Kotak Mahindra home loan interest rate
| Rate of interest on home loan | Best rate | Highest rate |
| For salaried women | 7.50%* | NA |
| For non-salaried women | 7.55%* | NA |
*Rate applicable from June 10, 2022
Longest tenure: 30 years
Processing fees: None, right now; 0.5 to 1 % of the loan amount, typically.
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Affordability scale: High
Advantages: You can get an instant approval for your home loan through the Kotak Digi Home loan facility. Since the bank has kept the rates at the lowest level in the entire market in the past one year and plans to keep housing finance segment as its key focus, borrowers can expect extended benefits.
Disadvantages: When compared to some public lenders, Kotak Mahindra has less penetration in India. In case of home loans, you always have to make physical visits to the branch for various purposes.
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Best banks for home loans: 3
Bank of Baroda
The Vadodara-headquartered Bank of Baroda became the third-largest bank in India after SBI, after its merger with Dena Bank and Vijaya Bank in April 2019. Founded by the maharaja of Baroda in 1908, the bank, along with 13 other major commercial banks of India, was nationalised on July 19, 1969, by the government and currently operates more than 10,000 branches in India and abroad.
Bank of Baroda home loan interest rate
| Rate of interest on home loans | Best rate | Highest rate |
| For salaried individuals | 7.40% | NA |
| For self-employed individuals | 8.10% | NA |
*Effective from June 9, 2022
Maximum tenure: 30 years
Processing fees: None currently
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Affordability scale: High
Advantages: The process to get a loan is very easy on the online platform.
Downside: People with poor credit scores will find the cost of borrowing higher and should, thus, focus on getting credit from HFCs or NBFCs. As mentioned earlier, public lenders are highly slow on passing on crucial information to their borrowers.
Lowest home loan interest rate: 4
Punjab National Bank
The second-largest public sector bank in India, Punjab National Bank (PNB) is also currently offering home loan interest rates at affordable rates. The New Delhi-headquartered state-owned bank was founded in 1894 and has over 80 million customers and 6,937 branches across 764 cities.
Punjab National Bank home loan interest rate
| Rate of interest on home loans | Best rate | Highest rate |
| For salaried individuals | 7.40% | NA |
| For self-employed individuals | 7.45% | NA |
Rates applicable from June 9, 2022
Maximum tenure: 30 years
Processing fees: None at present. Typically, it is 0.35% of the loan amount, with the lower and upper limit capped at Rs 2,500 and Rs 15,000, respectively.
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Affordability scale: High
Advantages: The temporary waiver in processing fee lowers the overall expense for the borrower. People with good credit scores are also invariably rewarded by the bank.
Disadvantages: The bank’s image has suffered major setbacks in the recent past amid a dramatic surge in toxic loans and its alleged involvement in fraud cases. Also, borrowers might find the services much less customer-friendly than most private lenders.
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Lowest home loan interest rate: 5
State Bank of India (SBI)
The largest mortgage lender in India, government-run State Bank of India (SBI) has assisted over 30 lakh families in their home purchases till date. Established in 1955, the lender also has over 24,000 branches in India and abroad. Note that SBI is the biggest player in the home loan segment, with a book size of Rs 5.05 trillion. On a year-on-year basis, its home loan book has grown by 11% cent in Q1, FY22.
SBI home loan interest rate
| Rate of interest on home loan | Best rate* | Highest rate* |
| For salaried women | 7.55% | 8.05% |
| For self-employed women | 7.55% | 9.70% |
*Rate applicability from June 15, 2022
Longest tenure: 30 years
Processing fees: 0.40% of the loan amount, subject to a minimum of Rs 10,000 and a maximum of Rs 30,000 with GST. For projects where the bank has a tie-up with the builder, the rate will be 0.40% subject to a maximum of Rs 10,000 plus taxes.
However, if a borrower applies for a home loan between August 1, 2021 and August 31, 2021, SBI will charge no processing fee on home loans under its Monsoon Dhamaka offer. After this period, borrowers will have to pay 0.40% of the home loan amount as the processing fee at SBI.
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Affordability scale: High
Advantages: The government-run bank is always among the first ones to reduce its interest rates, in case the RBI lowers the repo rate. It also makes perfect sense to rely on one of the best-performing Indian banks to meet your borrowing needs. The great financial health of the bank also gives borrowers a reason to stick with SBI.
Since SBI has done away with occupation-linked interest penalty recently, it is also now charging same interest from salaried and self-employed professionals.
Disadvantages: The number of documents that applicants have to submit are high considering the bank employs strict due diligence to affirm the creditworthiness of the borrower. The best rate of interest is also offered to borrowers with credit scores of 750 and above.
Public lenders may sometimes be lax in passing on crucial information that can be beneficial for home loan borrowers. This means you will have to continue to track news development related to changes in home loan policies and demand the due benefits from time to time.
Lowest home loan interest rate: 6
HDFC
Established in 1977, HDFC has helped over 80 lakh people purchase their homes till date. It is important to note here that HDFC, a Mumbai-headquartered housing finance company (HFC), should not be confused with HDFC Bank, even though the two entities are part of the same HDFC Group.
HDFC home loan interest rate
| Rate of interest on home loan | Best rate* | Highest rate* |
| For salaried women | 7.90% | NA |
| For self-employed women | 7.90% | NA |
*Rate applicability from June 2022
Maximum tenure: 30 years
Processing fees: Up to 0.50% of the loan amount or Rs 3,000, whichever is higher.
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Affordability scale: High
Advantages: HDFC is also among the first HFCs to reduce rates after the RBI announces rate cuts. As part of a highly successful group, the HFC also has great scope to offer benefits to its customers.
Disadvantages: The best rates by HDFC are available to borrowers with a credit score of at least 750. You will not be able to get these rates in case of lower scores.
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Best home loan bank: 7
ICICI Bank
ICICI Bank, the country’s second-largest private lender by market-capitalisation, was originally promoted in 1994 by ICICI Limited and was its wholly-owned subsidiary. ICICI Bank currently has a network of 5,288 branches across India.
ICICI Bank home loan interest rate
| Rate of interest on home loans | Best rate* | Highest rate* |
| For salaried individuals | 8.60% | NA |
| For self-employed individuals | 8.65% | NA |
*Rate applicability from June 8, 2022.
Maximum tenure: 30 years
Processing fees: 0.50% of the home loan amount, starting from Rs 1,100.
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Affordability scale: High
Advantages: One of the most customer-friendly banks, ICICI Bank is also quick in offering rate transmission benefits. The ease of conducting business on its various online platforms is also remarkably easy, unlike some other banks.
Disadvantages: Since the bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its group companies, you could expect a lot of cold calls.
Also see: How to check ICICI Bank home loan status and process to get ICICI home loan statement
Best home loan bank: 8
LIC Housing Finance
A subsidiary of LIC, the company has so far approved over 3.35 lakh home loans.
LIC Housing Finance home loan interest rate
| Rate of interest on home loans | Best rate | Highest rate |
| For salaried individuals | 6.66%* | 7.80% |
| For self-employed individuals | 6.66%* | 7.90% |
Maximum tenure: 30 years
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Processing fees: 0.25% of the loan amount, with the upper limit capped at Rs. 10,000.
Affordability scale: Average
Advantages: LIC HFL offers 90% of the property value as home loan.
Disadvantages: Interest rates are not as low as some of the leading Indian banks.
*To cash in on the festive season in 2021, LICHF has expanded its best rate to home loans of up to Rs 2 crores, in case the loan is sanctioned from September 22, 2021 to November 30, 2021. The new rate is available to all categories of home buyers. The processing fee for this festive offer has also been capped at Rs 10,000 or 0.25% of the loan amount, whichever is lower.
Best home loan bank: 9
Canara Bank
Founded in July 1906 at Mangalore, Karnataka, Canara Bank was nationalised in 1969. This bank which is over a century old, has its headquarters in Bengaluru and operates over 10,391 branches across India. Last year, Canara Bank became the fourth-largest state-owned bank by assets after its merger with Syndicate Bank assuming a business size of over Rs 16 trillion.
Canara Bank home loan interest rate
| Rate of interest on home loans | Best rate | Highest rate |
| For salaried individuals | 6.90% | 8.90% |
| For self-employed individuals | 6.90% | 8.90% |
Maximum tenure: 30 years
Processing fees: 0.50% of the loan amount with the minimum and the upper limit capped at Rs 1,500 and Rs 10,000, respectively.
Affordability scale: Average
Advantages: You could repay your loan till you attain the age of 75 years. This means people purchasing their home in their middle ages, will find this bank more fitting.
Disadvantages: For a higher loan size, you will have to make a contribution of up to 25% of the property’s value. Unlike most banks, Canara Bank also charges a processing fee on home loans even now.
Best home loan bank: 10
HDFC Bank
Those who find it more comfortable to stick with a bank rather than a HFC could apply for a home loan at HDFC Bank, the baking subsidiary of the HFC, HDFC. Incorporated in 1994, the bank has a nationwide network of 5,430 branches.
HDFC Bank home loan interest rate
| Rate of interest on home loans | Best rate | Highest rate |
| For salaried individuals | 6.80% | 7.85% |
| For self-employed individuals | 6.80% | 7.85% |
Maximum tenure: 30 years
Processing fees: Up to 0.50% of the loan amount or Rs 3,000, whichever is higher.
Affordability scale: Average
Advantages: The bank is comparatively fast in transmitting benefits of policy rate cuts.
Disadvantages: The process to get your loan approved may be longer, considering that the bank would demand a great deal of documents and carry out several checks, to avoid bad loans. This has been instrumental in keeping the bank’s financial health in check, even during the worst of the financial crisis.
Best home loan bank: 11
Axis Bank
A leading private sector bank established in 1993, Axis Bank currently runs around 4,500 branches in India and abroad.
Axis home loan interest rate
| Rate of interest on home loans | Best rate | Highest rate |
| For salaried individuals | 6.90% | 8.40% |
| For self-employed individuals | 7% | 8.55% |
Maximum tenure: 30 years
Processing fees: Up to 1% of the loan amount, with the minimum amount capped at Rs 10,000.
Affordability scale: Average
Advantages: The bank is a pioneer in terms of rewarding credit-worthy individuals and has been among the first to offer them lower rates of interest.
Disadvantages: While most banks offered a processing fee waiver in view of the festive season and the Coronavirus pandemic starting October 2020, Axis Bank continues to charge this duty. Also, the processing fee of this bank is comparatively higher than what is charged by other banks.
Important rules to follow when deciding on best bank for home loan
Banks versus HFCs
Banks are faster in passing on the rate cut benefits to customers, as compared to NBFCs and HFCs.
Salaried versus self-employed borrower
Salaried individuals can get a better deal from a bank, if their credit score is good. Banks will be willing to negotiate a sweeter deal, if you are a bankable customer.
Fixed rate or negotiable?
Banks are not averse to negotiating even though it might not appear so. After all they are selling a product like any other company.
Nothing like one-size-fits-all
Each bank is different and offers different benefits. Select a bank, based on your own individual requirement.
Home loan interest rate all banks in 2022: Things to keep in mind
- Amid increasing delinquency rates, almost all banks now offer their best interest rates only to applicants with good credit scores. As mentioned earlier, a credit score above 700 qualifies as a good credit score.
- Changes in the repo rate will not immediately reflect in your home loan EMI payments. Rates are reset by banks at fixed intervals.
- Be mindful that banks cannot charge a penalty for prepayment of home loans linked with the floating rate of interest.
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FAQs
What is the repo rate?
The repo rate is the interest that India’s apex bank, the RBI charges from scheduled banks in the country, to offer them funds. Whenever there is a tweak in the repo rate, the banks also increase or decrease the interest rates for the common man.
How is an HFC and a bank different?
While banks are also engaged in various other activities, HFCs purely engage in the function of providing home loans.
My credit score is poor. Will I have to pay higher interest rates?
Most Indian banks now offer their best rate to customers with impressive credit scores. This means, borrowers with poor scores will be asked to pay higher interest.
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