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Home Loan Interest Rates And Charges

What is the Interest Rate on a Home Loan?

Usually expressed as a percentage, home loan interest rate is the rate at which interest is charged on the principal home loan amount over a specified tenure.

Tata Capital offers among the most competitive home loan interest rate in India, starting at just 8.50%.

Why are Interest Rates on Home Loan so Important?

Home loan interest rates are a vital part of a home loan. The home loan interest calculation lets you know in advance the amount that you’d need to pay over and above the principal home loan amount. Given that home loans are generally long-term loans, extending up to 15 to even 30 years, the total interest can become a considerable sum over time. Even a slight percentile difference in housing loan interest rate can be significant over years. Plus, home loan interest will also rise with an increase in tenure. Therefore, it is important to check and compare home loan interest rates and choose a lender offering competitive home loan interest rates in India.

How is Your Home Loan Interest Rate Calculated?

Housing loan interest is usually calculated on the outstanding principal amount at the end of each day and charged on a monthly basis. The lending institution takes the outstanding loan amount per day and multiplies it by the latest home loan interest rate that has been assigned for housing loan interest calculation.

Housing loan rates do not remain constant. They are subject to change, primarily in accordance with the monetary policy set by the Reserve Bank of India (RBI), which includes the base lending rate and MCLR. Your home loan interest rate is also calculated based on your credit rating and varies across lenders, depending on how much an institution can lend. 

What is MCLR?

In 2016, the RBI announced a new set of guidelines for lending called the Marginal Cost of Funds-Based Lending Rate (MCLR). The MCLR was introduced for all loans granted after April 1, 2016 and has replaced the older base rate regime.

If you took out a home loan before this date, you can switch to MCLR depending on the cost of your loan, since some conversion charges are applicable.

What are Fixed and Floating Home Loan Interest Rates?

Lenders primarily offer two kinds of home loan interest rates – fixed and floating interest rate.

Fixed interest rate is one wherein the interest rate on the home loan will never change no matter how volatile the market scenario gets. People who have opted to repay their home loan through fixed rate need to pay equally divided fixed monthly instalments over a pre-determined tenure with no unexpected changes in the middle.

Alternatively, floating home loan interest rate is one which is volatile and keeps changing as per the market scenario. Since floating interest rate is dependent upon the floating or alterable base rate offered by lenders, it gets revised automatically and in proportion to a change in the base rate.

What is Repo Rate Linked Lending Rate?

The repo rate is the rate at which the RBI lends money to other commercial banks. This rate is reviewed once every two months. The repo-rate linked lending rate is the rate of interest set according to the repo rate and is directly affected by a change in the repo rate. For instance, if the RBI reduces the repo rate, the home loan interest rates will also go down for the borrowers.

Under repo-rate linked lending rates, a home loan borrower is not dependent upon the respective lending institution to decide the lending rate. It is automatically updated (on the first day of the month after the change) to be in line with the repo rate.

Salaried and Self Employed Interest Rate Table

 

Home Loan:

Customer Profile Loan Slab ROI* (%) ROI* (%)
Salaried Any Amount  8.50% onwards
 Self Employed Any Amount  8.75% onwards

                               

Home Equity

Customer Profile Loan Slab ROI* (%) ROI* (%)
 Salaried / Self Employed  Any Amount  10.10% onwards

 

 

*Final ROI may vary based on credit checks, property & other parameters

 Searching the market for getting the right home loan interest rate is essential for reducing your costs. Housing loan interest rates will vary based on the different home loan schemes available for individual buyers, joint buyers, women, etc. You can use a free online home loan emi calculator to get a fair idea of the amount you are eligible to borrow as loan principal

Home Loan Charges 

If you’re considering taking a home loan to fund the purchase of your dream home, it’s important to be aware of basic terminologies and terms. Additionally, you must also learn about various loan charges such as processing fee, home loan prepayment charges, legal charges, etc. before you apply for a home loan. 

Processing Fee

Processing fee refers to the one-time charge levied by Tata Capital on borrowers for processing their home loan applications. The processing fee at Tata Capital is charged at the rate of 0.5% of the loan amount onwards + GST.

Foreclosure

Foreclosure means repaying your loan EMI in a lump sum rather than in instalments. A borrower at times ends up repaying their loan amount before the end of their prescribed time limit. In such cases, home loan foreclosure or pre-closure charges will be levied by Tata Capital as a penalty for repaying the loan before the end of its term. No charges will be levied when you prematurely pay off your home loan with your own funds. However, if you pay off your home loan prematurely using someone else’s funds, Tata Capital will charge home loan foreclosure charges.

Delayed EMI Payments

Missing or defaulting on your home loan monthly instalments or EMIs will lead to EMI delay. This generally happens due to insufficiency of funds in your loan account. Delaying EMI payments can lead to penalties and will severely hamper your credit rating, in turn, causing trouble in all your future dealings and borrowings with other lending institutions.

In case of delayed EMI payments, a charge at the rate of 2% over the prevailing rate of interest will be applicable for the period of delay.

There could be cases where the entire principal home loan amount is transferred to another bank extending lower home loan interest rates. In case of such balance transfers, home loan transfer charges will be levied. 

 

Collection Agency

Tata Capital may hire organisations that specialise in pursuing payments owed by businesses and individuals on actuals. Debt collectors operate on behalf of the party that is owed money and in return charge a fee which is usually a percentage of the total amount owed; this fee is usually charged on actuals. 

Legal Charges

Once a borrower submits the relevant property documents required for loan sanction on actuals, these documents are sent for legal verification. This verification happens at a fee that can vary depending on the lending institution and is usually charged on actuals. 

Other Parameters

PDC charges, loan cancellation charges, dishonour of cheque charges (cheque bounce), rejection of Electronic Clearance Service (ECS) charges, PDC swapping charges, account maintenance charges, CERSAI charges may also apply besides those mentioned above, on a case-to-case basis. 

Miscellaneous Charges

Processing Fee

0.5% of the loan amount onwards + GST

Detailed FAQs

Our interest rates begin from 8.50% and are highly competitive. We offer concessional interest rates to women beneficiaries. Additionally, we provide subsidized home loans to low income groups under PMAY subsidy.

The following are the factors that influence your home loan interest rate –

  • MCLR Rates or Marginal Cost of Funds Based Lending Rate – The minimum rate at which a lender can offer you a loan

  • Type of Interest – Whether you choose a fixed, floating, or mixed interest rate

  • Loan-to-Value (LTV) Ratio – Percentage of the property value that can be financed using a loan

  • CIBIL or Credit Score – The higher the CIBIL score, the lower the rate of interest

  • Property Location – The more lucrative the property, the lower will be the rate of interest charged

  • Job Profile – Individuals with stable income charged lower interest rates

  • Loan Tenure – Shorter loan tenures attract lower rates of interest 

Foreclosure means to repay your entire home loan amount in a single payment instead of making Equal Monthly Instalments or EMIs. Loan lenders charge a certain fee as penalty for a home loan foreclosure. Foreclosure charges are generally levied when the home loan interest rate is fixed and has been pre-paid using sources that are not the applicant’s. Under such circumstances, a percentage of the outstanding principal amount plus taxes are levied as foreclosure charges.

Processing fee under home loan is the one-time amount charged by a lender at the time of processing the home loan application. The amount may differ from lender to lender. Generally, processing fees are non-refundable regardless of whether the home loan gets sanctioned or not. 

 

Home loan processing fee is a one-time amount charged by banks and NBFCs at the time of processing a home loan application. Under any circumstance, regardless of whether your home loan gets sanctioned or not, processing fee is not refundable.

Yes, home loan interest rates not only vary among different banks and lending institutions but also among cities depending upon the segmentation and the risk of the location.

If your home loan interest rate is fixed, then your EMI will remain unaffected by market fluctuations. However, if your home loan interest rate is floating, it will rise and fall with the market fluctuations. So, when the interest rate increases, your EMI amount will also increase and when the interest rate decreases, your EMI amount will also decrease.

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