A Home Loan is financial assistance provided by bank or NFBC to fulfill your dream of buying your own home. If you are planning to avail a home loan, you will find this post interesting. In this post, I will share information about the 10 Best Bank for Home Loans in India.
Firstly, I will share factors that I have considered to select the Best Bank for Home Loans in India.
Also Read – Second Home Loan Tax Implication and Benefit
Factors for selection of Best Bank for Home Loan
Interest Rate – The first important factor for consideration while availing a home loan is the Interest rate. You should opt for the bank offering the lowest rate of interest. A small difference in interest rate makes a huge difference in interest payment.
Processing Fees – The second important factor is a processing fee. The fees are of two types some banks charge fixed fees, while others charge a percentage of the loan value as a processing fee. You should consider banks offering the lowest processing fees.
Loan to Value Ratio – Loan to Value Ratio is another important factor. This ratio indicates how much finance the bank is ready to offer against your property value. The ratio varies from 75% to 90%.
Principal Component in EMI – The principal component in EMI plays a crucial role in deciding the best home loan providers. Most of the public-sector banks keep the principal component as 45% of the EMI. In some banks, interest component is bigger than the principal amount. You should select a bank with a higher principal component in EMI.
Prepayment Charges – Another important factor for consideration is prepayment charges. Some bank imposes prepayment charges if prepayment is made during the loan starting year.
Loan Processing Time – It is difficult to find out loan processing time. However, from end user feedback you to avail this information. Some Banks provide this information on the bank’s website.
Quick sanction and Disbursal Process – You should also consider the bank based on the disbursal process. Check and confirm the turnaround time of the shortlisted banks for disbursal. I recommend opting for a bank that is transparent, quick, and approachable.
Customer Support – Another important factor to consider is the customer support facility offered by the bank. Customer support plays a crucial role after the disbursal of a home loan.
Online Facility – The bank should provide an online facility where customers can see loan balances, rate changes, annual statements, etc.
Special Scheme/Offers – You can give priority to a bank or financial institution for a special scheme or offers provided by them. However, it is recommended to study the offer carefully before opting.
Also Read – NRI Home Loan – Document and Checklist
In a nutshell, I recommend considering the following points while selecting the best bank for Home Loan.
- Interest Rate
- Processing Fees
- Loan to Value Ratio
- Principal Component in EMI
- Prepayment Charges
- Loan Processing Time
- Quick sanction and Disbursal Process
- Customer Support
- Online Facility
- Special Scheme/Offers
7 Best Bank for Home Loan in India
#1 HDFC Home Loan
HDFC Home Loan is first in the list of best banks for home loan in India. HDFC is very stringent in document verification. The interest offered by HDFC Bank is competitive. HDFC provides loans for new house purchases, house construction, home improvement, and home extension. Key Features of HDFC Home Loan are given below.
- HDFC offers fixed, floating, and TruFixed types of home loans.
- HDFC offers a Step Up Repayment Facility (SURF). In this facility, repayment is scheduled as per expected growth in your income.
- HDFC also provides the facility of a Flexible Loan Instalment Plan (FLIP). In FLIP EMI is higher during the initial years and it decreases in proportion to income.
- You will also get an Accelerated Repayment Scheme where you can increase the EMI at your convenience to repay the loan faster.
- TruFixed Loan where the interest rate is fixed for the first two years.
| Interest Rate | 8.75% to 9.65% |
| Processing Fee | 0.50% of Loan amount or Rs.3000 whichever is higher |
| Maximum Tenure | 30 Years |
| Pre-Closure Charges | NIL if paid from own sources |
| LTV | 90% of Property Cost up to 30 Lakh80% of Property Cost from 30 Lakh to 75 Lakh75% of Property Cost above 75 Lakh |
| Prepayment Charges | NIL |
Transparency in charges, good customer support service and multiple repayment options are few positive points about HDFC Home Loan.
#2 State Bank of India Home Loan
State Bank of India is next on the list of best banks for home loans. SBI offers home loans for house purchases, reconstruction, and home renovation as well as top-up loans. SBI’s interest rate is lower compared to other banks. However, you need to go through a tedious documentation procedure. SBI has very strict guidelines in terms of documentation and verification of property papers. Key features offered by SBI are given below.
- SBI provides loans at a daily reducing balance. This means your interest outgo will be less.
- SBI also offers Flexipay Home loan. EMI in this loan will be increasing with the loan year.
- SBI allows you to apply for subsidy under the PMAY scheme
| Interest Rate | 8.5 – 9.65% |
| Processing Fee | 0.35% of Loan amount or Minimum Rs.2000 + GST |
| Maximum Tenure | 30 Years |
| Pre-Closure Charges | NIL |
| LTV | 90% for loan amounts up to 20 Lakh80% for loan amounts above 20 Lakh |
| Prepayment Charges | NIL |
SBI offers the lowest interest rate with daily reducing balance. The approval process for the SBI home loan is slow.
#3 ICICI Home Loan
ICICI Home Loan is known for simplifying documentation, speed in approval, and competitive interest rates. ICICI bank offers loans up to 5 Cr. They offer loans for the purchase of new houses, reconstruction, and top-ups. Key features of ICICI Bank Home Loan are given below.
- You can apply for a home loan using a tablet or smartphone and get faster approval.
- ICICI Bank offers an online calculator facility this facility will help you in knowing your eligibility.
- ICICI Bank also provides a balance transfer facility.
- ICICI Bank allows you to apply for subsidy under PMAY.
- Customer Care offered by ICICI Bank is very good.
| Interest Rate | 8.75-10.05% |
| Processing Fee | 0.5%-1% of the loan amount |
| Maximum Tenure | 30 Years |
| Pre-Closure Charges | NIL |
| LTV | 90% for loan value less than Rs. 20 lakhs80% for loan value more than 20 lakhs75% for loans above Rs. 75 lakhs |
| Prepayment Charges | NIL (Min prepayment should be equal to one EMI) |
Quick processing of home loan, doorstep services are positive side of ICICI Home Loan. However, you need to pay the higher processing fee and interest rate.
#4 Axis Bank Home Loan
Axis Bank Home Loan is next on the list of Best Home Loans. Axis Bank offers home loans for purchase, construction as well as top-up loans. The minimum amount offered by this bank is 3 Lakh. Key Features associated with Axis Bank Home Loan are given below.
- The minimum Loan amount is 3 Lakh.
- Fast forward home loan facility where you can increase EMI and also stop paying EMI for a few months.
- No Prepayment charges and an attractive interest rate.
| Interest Rate | 8.75-9.10% |
| Processing Fee | 1% of the loan amount (Minimum Rs.10,000) |
| Maximum Tenure | 30 Years |
| Pre-Closure Charges | NIL for floating rate & 2% for fixed-rate loans |
| LTV | 90% for loan value less than Rs. 20 lakhs80% for loan values of more than 20 lakhs75% for loans above Rs. 75 lakhs |
| Prepayment Charges | 2% for fixed-rate loans |
The interest rate of Axis Bank is competitive. However, you need to pay a higher processing fee and other charges to avail of this loan.
#5 LIC Housing Finance Home Loan
LIC Housing Finance Home Loan is next on the list. LIC Housing Loan offers loans for the purchase of new houses, reconstruction, renovation, and top-up loans. The interest rate under LICHF is calculated on a monthly reducing basis. You will not get a fixed interest rate loan in LIC housing finance.
| Interest Rate | 8.50% onwards |
| Processing Fee | 0.5% of the loan amount (Minimum Rs.10,000) |
| Maximum Tenure | 30 Years |
| Pre-Closure Charges | NIL |
| LTV | 85% for loan value up to Rs. 20 lakhs80% for loan above 20 lakh and up to 75 lakhs75% for loans above Rs. 75 lakhs |
| Prepayment Charges | NIL |
LIC Housing Finance offers home loans at competitive interest rates. However, the entire process is manual and it takes a lot of time.
#6 PNB Housing Finance
PNB Housing Finance provides an extensive range of home loan products such as Home Purchase Loan, Construction Loans, Home Extension Loan, Home Improvement Loan, and Plot Loans.
| Interest Rate | 8.50 % onwards |
| Processing Fee | 0.35% for loan amount |
| Maximum Tenure | 30 Years |
| Pre-Closure Charges | NIL for floating-rate loans |
| LTV | 90% for loan value less than Rs. 30 lakhs80% for the loan value of more than 30 lakhs. |
| Prepayment Charges | NIL |
#7 Bank of Baroda Home Loan
Bank of Baroda offers home loan at very competitive rates. Bank of Baroda offers various types of home loans such as home improvement loans, home suvidha personal loans, Baroda top-up loans, etc. Interest rates and other features associated with BOB home loans are given below.
| Interest Rate | 8.40% Onwards |
| Processing Fee | Fixed-rate of Rs.7500 |
| Maximum Tenure | 30 Years |
| Pre-Closure Charges | NIL |
| LTV | 90% for loan value less than Rs. 30 lakhs80% for the loan value of more than 30 lakhs |
| Prepayment Charges | NIL |
#8 Aditya Birla Capital Home Loan
Aditya Birla Capital Home Loan is next on the list of best home loans list. Aditya Birla Capital Home Loan is popular for faster processing and lower interest rates. They also offer doorstep service for the people. Interest rates and other features of Aditya Birla Capital Home Loan are given below.
| Interest Rate | 9% Onwards |
| Processing Fee | Up to 1-2% of the Loan Amount |
| Maximum Tenure | 30 Years |
| Pre-Closure Charges | NIL for floating-rate loans |
| LTV | 90% for loan value less than Rs. 30 lakhs80% for loan value between 30 lakhs – 75 lakhs75% for a loan value above Rs. 75 lakhs |
| Prepayment Charges | NIL |
Frequently Asked Questions about Home Loan
Why the new customers is offered with lower interest rate compared to existing ones?
I took taken home loan from the bank before 3 years. At present bank is charging me an 11.5% interest rate. However, a bank is offering a new home loan with a much lower interest rate of 9.40% to new customers. Why existing customers like me are charged with higher interest rates? This is a very common question. The answer of this question is quite simple. The bank is offering a home loan based on the current applicable interest rate. The interest rate is variable and depends on multiple factors.
First, let us understand how bank decides on home loan lending rates. As per the new system introduced in April 2016 by RBI, all banks are using MCLR for lending funds. MCLR is the Marginal Cost of Funds-based Lending Rate.
The calculation of MCLR depends on multiple factors like –
- Marginal cost of funds
- Operational Cost of Banks
- The cost incurred in managing CRR with RBI
- Spread or Margin
As multiple variable factors are involved while calculating interest rates you will find a difference in Interest rates offered by various banks.
Home loan Interest rate = MCLR + Spread
So, if a bank has an MCLR of 9.15% and spread of 0.25% the bank will offer home loans @9.4%.
The bank is offering lower interest rates to new customers because MCLR or spread is changed or reduced.
Why do banks take conversation fees to reduce home loan interest?
You can reduce your home loan interest rate by paying conversation fees to the bank. By paying this fee you can convert your existing adjustable rate to the current adjustable rate. The bank will take conversation fees to fulfill the gap of change in the spread.
You should avail of this offer only if you have a large outstanding loan balance or long tenure left for the repayment of a home loan.
Why reduction in outstanding is very low during the starting period of the home loan?
If you carefully observe your home loan statement you will be surprised to note that the reduction in outstanding will be very low during the starting period. This is because the interest component will be very high at the initial stage. Interest amount will be calculated on the whole amount during the initial stage. In the first five years, only a few percentage of EMI will go towards paying the principal. So, your principal will reduce at a lower rate.
Why you should make a prepayment of a Home Loan?
You should make maximum prepayment at the initial stage. The prepayment at the initial stage helps to reduce the amount payable towards interest. A reduction in the amount paid towards interest means saving money.
Over to you
Have you taken a Home loan from the bank or institution mentioned above?
Do share your experience in the comment section given below.
