Home loan interest rate is a crucial factor in the structure of your home loan. It is a primary contributor to your monthly EMI and the cost of your loan. Getting a low interest rate on a housing loan is a progressive step towards healthy financial planning.
When it comes to home loan interest rates you should invest your time, do adequate research, and select the best fit for you.
SMFG Grihashakti offers competitive interest rates on housing loans, starting at just 10%* per annum.
For increased chances of securing a home loan with a lower interest rate, it is essential to maintain a credit score of at least 700 and aim to keep your debt-to-income ratio below 30%. Several other factors come into play when determining the final housing loan interest rate, which we will discuss in the following sections.
Types of Home Loan Interest Rates
Interest rates on house loans can be of 2 types – fixed and floating. The type of home loan interest rate depends on your selection. You need to assess your suitability and choose.
a) Fixed Interest Rates for Loans
A fixed loan interest rate for a home is a type of interest rate on a housing loan wherein your interest rate is locked for the entire tenure of your loan. During the total tenure, your home loan interest rate remains fixed. This means that your EMI will not change even if there are market changes.
The key advantage of a fixed rate is that it protects you from market volatility, ensuring that your EMI does not increase due to rising interest rates. This allows for better financial planning, as you can budget your expenses with certainty. However, fixed interest rates are typically higher than floating rates at the time of loan disbursement, and if market rates decrease, borrowers with fixed rates do not benefit from reduced EMIs.
b) Floating Interest Rates for Loans
A floating loan interest rate for a home is one in which the current interest rate on a housing loan is subject to revision every quarter. The home loan interest will be pegged to the base rate. When the base rate changes due to the RBI’s policy as per market changes, the interest rate on housing loans charged may also vary.
However, this will also depend on the lender’s policy and their rate adjustments, thus it would be prudent to have a conversation with your lender to understand how market changes may (or may not) affect your home loan interest rates. A loan with a floating interest rate is also called a variable-rate mortgage.
While floating interest rates offer potential cost savings, they also come with some uncertainty. If market rates rise, your EMI may increase, impacting your financial planning. It is advisable to consult with your lender to understand how rate adjustments may affect your loan.
How to Calculate Interest On a Home Loan?
You can input the interest rate on a housing loan that may be applicable to your loan on our EMI calculator and know your EMI for a given loan amount and tenure. This has multiple benefits like having the flexibility of choosing your tenure and more efficient financial planning.
House loan interest rate for a home loan is calculated by a lender based on several factors such as:
- Market Conditions - Factors such as economic trends, geopolitical risks, and inflation can impact the current interest rate on housing loans.
- Risk Policy of the Lender - Each lender follows specific risk assessment policies when determining interest rates.
- Your Income - A stable and sufficient income indicates a strong repayment capacity, which can lead to more favourable interest rates.
- Your Age - Younger applicants may have a longer career span and higher future earning potential, which can positively influence the interest rate offered. Older applicants nearing retirement may face slightly higher rates due to perceived repayment risk.
- Credit score and history - A high credit score is preferred as it reflects responsible financial behaviour and timely repayments.
- Existing Debts - Having multiple debts may show financial strain and instability, which might reduce loan eligibility and lead to higher interest rates.
- Nature and Value of the Property - Properties situated in prime locations having excellent market value are generally considered less risky, which may result in a lower home loan rate.
- Your Location - Urban locations having convenient facilities may have high property value, and demand, which can impact the final interest rate offered.
- Nature of Employment - Interest rates may vary for salaried and self-employed individuals.
SMFG Grihashakti offers floating rates of interest on home loans that are linked to the Retail Prime Lending Rate. We offer attractive interest rates on house loans depending on the applicant’s eligibility and our policy at the time of loan application.
To know more, get in touch with us today.
How to Reduce Home Loan Interest Rates?
You can try to reduce your interest rate on a housing loan by following a few simple steps:
1. Lengthen Your Repayment Tenure
When you opt for a longer repayment tenure, the payable interest on your housing loan is lower. You can use our EMI calculator to select a tenure so that your monthly EMI can easily fit into your budget. However, it is important to know that a longer tenure means that you will be paying a higher home loan interest amount over the tenure of the loan.
2. Opt for a Down Payment
It is highly advisable to maximise your down payment at the time of availing the loan so that your required loan amount is lower. If your repayment capacity (monthly income minus existing EMIs) is good, then the lender may consider lowering your home loan interest rate.
3. Consolidate Your Loans
If you have more than one loan, it would make sense to consolidate all in one. This will help you in managing your debt and most importantly it will lower your EMI. Similarly, before applying for a home loan, it is highly advised to keep your existing EMIs as low as possible, so that your repayment capacity is excellent.
A few other factors include maintaining an excellent credit score and history, showing extra income (if any) to the lender before applying, and adding a co-applicant with an excellent credit score and a stable income.
How Can You Get the Lowest Home Loan Interest Rate?
Selecting a short repayment tenure, adding a co-applicant, etc. can help you lower your overall interest costs. Let us have a look at these and a few more strategies in detail.
Select a Short Tenure for Repayment
When you have a short repayment tenure, you can save on interest costs as the rate is applied for a lesser number of years. Additionally, lenders may also grant you a lower interest rate to start with when you opt for a shorter tenure. However, shorter repayment periods can increase your monthly payment. It is important to consider both sides carefully and select the option that best fits your needs and budget.
Opt for a Balance Transfer Facility
With a home loan balance transfer, you can transfer your existing home loan to another lender who can offer you lower interest rates on house loans. It is important to check all the included fees, charges, and your potential savings before you opt for a balance transfer. The home loan balance transfer will also be subject to your eligibility.
Request Annual EMI Revisions
A higher EMI means that you can pay off the outstanding balance quicker and save on interest costs. You can opt for annual revisions of EMI if you have received a salary hike or an increase in your income. Generally, every 10% increment in income can be accompanied by a 5% EMI increase.
Prepay with the Surplus Funds Available
You can consider prepayment if you have come into additional funds such as a bonus on your salary or a return on an investment. This will help you reduce interest costs. However, it is important to consider that some lenders charge prepayment charges.
Current Home Loan Interest Rates from SMFG Grihashakti
At SMFG Grihashakti, the current interest rates on housing loans are reasonably priced, depending on the eligibility and other applicable criteria of the borrower.
|
Loan Slab |
Home Loan Interest Rates (p.a.)
|
| For Salaried Applicants |
10% Onwards* |
| For Self- Employed Applicants |
11% Onwards* |
* The final offered rate will depend on the income level and property being offered as security
The table below is an example for your understanding
| Loan Amount |
INR 1,00,000
|
| Home Loan Interest Rate |
10% per annum |
| Maximum Tenure |
30 years |
| Your Monthly EMI per lakh |
INR 878 |
Please note that the above table is only for your understanding and that the EMI amount does not take into account other components such as insurance. Home loans provided by SMFG Grihashakti are subject to the borrower’s eligibility and our policy at the time of loan application. Please click hereto learn more about the applicable fees on home loans.
Determining Factors for Your Home Loan Interest Rate
When applying for a home loan, several factors influence the best house loan interest rate you're eligible for. Understanding these factors can help you negotiate a better rate and save on interest over the loan tenure. Understanding how they influence your home loan interest rate can help you make more informed decisions when choosing a loan. Here are some key factors:
Credit Score
Your credit score plays a crucial role in determining your home loan interest rate. A higher credit score indicates a lower credit risk, leading to a lower interest rate. Lenders typically offer better rates to borrowers with scores above 700.
Income and Employment
Lenders consider your income stability and employment history when determining your interest rate on a housing loan. A steady income and long-term employment can help you secure a lower rate.
Loan Amount
The loan amount relative to the property value (loan-to-value ratio) can impact your interest rate. A lower LTV ratio may result in a lower rate.
Type of Interest Rate
The type of interest rate you choose can impact your rate. Fixed interest rates for loans lock in your interest rate for the entire loan tenure, ensuring that your EMI remains constant despite market fluctuations. On the other hand, floating interest rates for loans are subject to periodic revisions based on market changes and are pegged to the base rate, potentially leading to fluctuations in your housing loan interest rate. It is advisable to communicate with your lender to know how market variations could impact your home loan interest rates under a floating rate scheme.
SMFG Grihashakti provides home loans with floating interest rates tied to the Retail Prime Lending Rate. Our competitive loan interest rates are determined based on the applicant's eligibility and our current policy at the time of application.
Different Methods for Calculating Interest Rate Payments
The common methods of calculating interest rates on housing loans include the following.
Simple Interest Method
In this method, interest is calculated only on the original loan amount (principal) throughout the loan tenure. It is commonly used for short-term loans as the calculation is straightforward and results in predictable payments.
Compound Interest Method
Interest is calculated on both the principal amount and the accumulated interest from previous periods. This method, often referred to as "interest on interest," is commonly used in long-term loans and investments, leading to higher total interest payments.