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The competition on home loan interest rates to attract customers is increasing between the country’s three largest private banks – HDFC Bank, ICICI Bank and Axis Bank. If you are also dreaming of buying your own home and are planning to take a loan from the bank, then it is very important to know which bank is offering the cheapest home loan at this time. Even a small difference in interest rates can make a difference of lakhs of rupees in interest on a long term loan. In such a situation, it is important to understand what will be your monthly installment (EMI) in which bank on a loan amount of Rs 25 lakh and which option can prove to be the most economical for you.
In the current financial market, there is competition in the interest rates of these three giants of the private sector. HDFC Bank home loans usually start at introductory rates of around 7.20% to 7.75% per annum. At the same time, ICICI Bank’s home loan starts from around 7.45% to 7.75%, while Axis Bank’s interest rates start from around 8.00%. However, it is very important to be clear that these minimum interest rates (floor rates) of the bank are not available to every customer. Your CIBIL Score (CIBIL Score 750+), your source of income, being employed or a businessman and the location of the property decide the exact rate at which the bank will offer you the loan.
If you take a home loan of Rs 25 lakh from any of these banks for a period of 20 years (240 months), then depending on the interest rates, the mathematics of your monthly installment will be like this. If you get a loan from HDFC Bank at an effective rate of around 7.50%, your monthly EMI will come to around Rs 20,130. Whereas, if you get a loan from ICICI Bank at the rate of 7.75%, then your monthly installment will be around Rs 20,573. Additionally, if the loan is approved from Axis Bank at a rate of 8.25%, your monthly EMI can increase to around Rs 21,453. In this way, there can be a difference of a few hundred to one-two thousand rupees every month between the minimum and maximum rates, which creates a huge difference in the total tenure of 20 years.
One should not take the decision of home loan only after seeing the low interest rate, but one should also have complete information about the other charges associated with it. Banks charge a fixed fee ranging from 0.5% to 1% of the loan amount in the name of home loan processing. Apart from this, expenses of legal charges, technical valuation fees and technical document verification are also added. The good thing is that as per the rules of the Reserve Bank of India (RBI), banks cannot charge any kind of prepayment or foreclosure charges on floating rate home loans, which means that you can repay your loan ahead of time whenever you want without any additional penalty.
If your CIBIL score is excellent and your company is a good MNC or government institute, HDFC and ICICI Bank can give you loan at the lowest spread. Before finalizing the loan, get your ‘loan eligibility sanction letter’ issued from all three banks and compare it. Many times banks waive the processing fees completely or give special concessions under the festive season offer. Therefore, instead of relying only on advertisements, take the right and wise decision keeping in mind your financial capacity, CIBIL records and bank services so that your dream house can be built easily without any financial stress.