Oct 13, 2023Homes and People

Find the Best Housing Loan Interest Rate | Tips for Choosing a Bank

by Godrej Properties Limited

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One of the most significant financial decisions that you will ever make is owning a house. Once you have reached your perfect abode, the next step is to find the right bank or financial institution that can offer you a home loan. So, we are here to guide you on choosing a bank for a home loan and assist you through this journey.

Best Bank for home loan

Verify the Bank's Link to the RBI Repo Rate

There has been a prevailing practice wherein banks delay lowering housing loan rates of interest despite government reductions. To safeguard borrowers’ interests, RBI has introduced RLLR (Repo Linked Lending Rate), which is an external benchmark. Banks adhering to this system promptly pass on rate-cut benefits when interest rates drop. 
 

Comparing RLLR and MCLR Home Loans

RLLRMCLR

An external benchmark established by the RBI ensures higher reliability;Tied to the repo rate (RBI's lending rate to banks);Borrowers can independently monitor the repo rate.Typically updated every 3 months, allowing swift rate adjustments.
 

An internal benchmark set by the bankDetermined by the bank, incorporating factors like funding and operating costs.Borrowers rely on the bank for rate change information.Usually revised every 6 months or annually, leading to slower adjustments in interest rates.
 

Find Banks with No Prepayment Fees

Opting for early repayment of your home loan might incur a prepayment charge, which is applicable for certain banks. However, loans with floating interest rates are exempt from this fee. 

Salaried individuals using personal funds to prepay are also exempt. In other cases, banks may impose fees, potentially reaching up to 2%. So, it is important to know the terms and be sure that the bank does not impose this additional cost.

Select Home Loan Tenure Wisely

It is important to assess your financial situation before selecting a bank. This will help you pick a bank that offers a loan tenure that fits your needs. While opting for a longer tenure will result in lower EMIs but higher total interest, a shorter tenure means higher EMIs but lower overall interest. 

Find Banks Offering Low Processing Fees

The bank levies a processing fee on home loans. This fee varies between 0.5 to 2% of the total amount. This fee differs for salaried professionals and self-employed individuals. Additionally, you need to pay a GST on this fee. So, it is important to look for a bank with lower processing fees as it can help you save a substantial amount. 

Banks With Low Home Loan Processing Fees

Some of the banks that have lower processing fees are SBI, Bank of Baroda, Bank of India, HDFC Bank, Central Bank of India, and Kotak Mahindra. 

Assess Bank's After-Sales Service

Before you sign the dotted line, be sure that you also consider the bank’s after-sales service. This is extremely important since securing a home loan is just a single step. You would have to deal with the bank and their staff members for a decade or even more. So, be sure that their customer service is impeccable. 

 

 Frequently asked questions

1. Which bank is safe to take a home loan?

Ans: A reputable bank that holds a strong financial track record would be able to offer you a home loan that is safe and secure.
 

2. Is it better to take a home loan from a private or government bank?

Ans: Both private and government banks offer great home loan options with the best housing loan interest rates. You should compare their terms and know your requirements to make an informed choice.
 

3. How do I approach a bank for a home loan?

Ans: You can approach a bank by visiting a local branch and discussing loan options with a representative.
 

4. Which bank to choose for a home loan in India?

Ans: There are several trusted banks in India, like SBI, HDFC, Bank of Baroda, and many more, that offer the lowest housing loan interest rates. 

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