Banks like Bank of India, HDFC offer lowest home loan interest rates

Taking a home loan is a big step in one's financial journey, often being the largest loan an individual might take on, not just in terms of the amount borrowed but also due to its extended repayment tenure, which can span over 15 years or more. The allure of a home loan lies in its ability to facilitate the acquisition of a tangible, appreciating asset, making it a widely acknowledged 'good' loan.

It's important for prospective homeowners, to do a comparative analysis of the interest rates offered by various financial institutions and banks.

Here’s a look at the lowest home loan interest rates of some leading banks, according to Paisa Bazaar

Take a look at the interest rates offered by leading banks and the projected monthly installments for a home loan of Rs 30 lakh over a period of 20 years:

Bank of India offers an interest rate range of 8.30% to 10.75%, with the EMI ranging from Rs 25,656 to Rs 30,457.

Bank of Maharashtra has interest rates between 8.35% and 11.15%, resulting in EMIs from Rs 26,283 to Rs 30,762.

Union Bank of India offers interest rates from 8.35% to 10.75%, with EMIs ranging from Rs 26,283 to RS 30,457.

Bank of Baroda's interest rates vary from 8.40% to 10.65%, with EMIs between Rs 25,845 and Rs 30,153.

State Bank of India has interest rates between 8.40% and 10-15%, resulting in EMIs from Rs 26,035 to Rs 28,258.

Punjab National Bank provides interest rates from 8.45% to 10.25%, with EMIs ranging from Rs 25,845 to Rs29,150.

Canara Bank has an interest rate range of 8.50% to 11.25%, with EMIs from Rs 25,845 to Rs 31,478.

HDFC Bank provides an interest rate range of 8.70% onwards, with EMIs from Rs 26,416

Axis Bank offers a fixed interest rate of 8.75% to 13.30%, resulting in an EMI of Rs 26,511.

How to Calculate Interest on home loan?

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

Home loan amount

Loan repayment tenure

Rate of interest

Calculating the effective interest rate on your home loan

The interest rate applied to a home loan is a sum of two components: the base rate and the markup rate. Together, they constitute the Effective Interest Rate (EIR) you will be charged.

- Base Rate: This is the benchmark lending rate set by the bank for all retail loans. It's dynamic, adjusting in response to various financial factors.

- Markup: This is a small additional percentage levied on top of the base rate to determine the EIR for a particular home loan variant.

Thus, the Effective Interest Rate can be calculated as: EIR = Base Rate + Markup

Home loans are typically available under two interest rate schemes:

1. Fixed Interest Rate:

   - Nature: The interest rate remains constant over the loan period.

   - Advantage: Predictability in interest payments; immunity against rate hikes.

   - Disadvantage: Missed savings opportunity if lending rates decline.

2. Floating Interest Rate:

   - Nature: The interest rate varies in line with the bank's current lending rates.

   - Advantage: Benefit from decreased rates; typically lower initial rates than fixed models.

   - Disadvantage: Potential for higher payments if lending rates increase.

The interest rate you are eligible for is influenced by several factors including your creditworthiness, loan amount, professional background, and the stature of your employer. Given the significant impact a marginal difference in interest rates can have over the loan's lifetime, a thorough comparison across lenders is advisable before application.