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Choosing a bank home loan is the most important decision for middle-class families dreaming of buying their own home. If you are planning to take a home loan of Rs 20 lakh from HDFC Bank, the country’s largest private sector bank, then the first question that comes to your mind is what is the minimum and maximum interest to be paid on the loan. The home loan interest rates of the bank are decided based on the repo rate decided by the Reserve Bank of India (RBI) and your personal credit profile. The minimum starting interest rate for home loan in HDFC Bank starts from around 7.75% per annum to 8.00% per annum, while the maximum interest rate can go up to 13.20% to 13.45% per annum in cases with risk profile and poor credit score.
Home loan interest rates in HDFC Bank are linked to the external benchmark i.e. policy repo rate. The bank decides the final interest rate by adding its spread on top of the repo rate. The bank offers the lowest interest rates to salaried (employed) and customers with good credit records. If your CIBIL score is 750 or more, you can get a loan at a rate as low as 7.75% to 8.50%. However, if the applicant has a poor CIBIL score, the source of income is uncertain or the risk associated with the property is high, the bank’s spread increases and the maximum interest rate can even reach 13.20% to 13.45%. On an average, a common applicant can easily get a loan approved from the bank at an interest rate between 8.50% to 9.00%.
Your monthly installment (EMI) on a home loan of Rs 20 lakh will depend on the number of years you have taken the loan and the interest rate you have received. Let us understand how much the installment will be for different periods at minimum (8.00%), average (8.50%) and maximum rate (13.20%):
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For a period of 10 years: If you want to repay the loan in 10 years, then at the lowest rate of 8.00% the monthly EMI will be around Rs 24,265. If the interest rate is 8.50%, the EMI will increase to Rs 24,797. At the same time, if the maximum rate of 13.20% is applicable under the risk factor, then your EMI will jump to around Rs 30,135.
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For a period of 20 years: A tenure of 20 years is considered to be the most popular. EMI for 20 years at the rate of 8.00% comes to approximately Rs 16,729 (in some special schemes it can come up to Rs 16,419). At an average rate of 8.50% this EMI will be approximately Rs 17,356. But at the maximum rate of 13.20%, this EMI will increase to Rs 23,732 per month.
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For a period of 30 years: Choosing a longer tenure reduces the EMI burden, although the total interest paid increases. EMI for 30 years at the rate of 8.00% will be approximately Rs 14,675. At a rate of 8.50%, the monthly installment will be Rs 15,378, while at a maximum interest rate of 13.20%, the monthly EMI will increase to Rs 22,488.
HDFC Bank does not decide the interest rate just by looking at the loan amount, but also thoroughly examines the borrower’s profile. The first and foremost factor is the CIBIL score; The bank offers the lowest interest rates to applicants with a score above 750. The second factor is your employment type; Salaried employees working in multinational companies, government jobs or large corporates get slightly lower interest rates than self-employed individuals. Additionally, the loan-to-value (LTV) ratio, i.e. the amount of your down payment, also matters—if you make a down payment of 20% or more of the total property price, the bank will consider you a lower risk and offer you a better interest rate. Many times one gets the benefit of special discount even when applying for loan in the name of women.