Interest rates rising? Step-by-step guide to getting the cheapest home loan

Recently, the Reserve Bank of India (RBI) raised the repo rate by 50 basis points to 5.90%. This is the fourth time since May 2022 that repo rates have been revised. Home loan interest rates will increase because whenever there is an increase in the repo rate, financing becomes more expensive for banks and other financial institutions.

However, this is when borrowers can take a wise call and do their due diligence to get the best deal this festive season. Many banks are now offering discounts and offers on their home loan products. Some borrowers with an existing relationship with banks are also offered pre-approved loans. So, if you’re looking for better deals, now might be a good time to make a decision. Here’s what you can do.

Check your loan eligibility

First, you need to prepare a budget for buying a house. After establishing your budget, you can set aside the money for the down payment and then see how much loan you need to borrow from banks or other financial institutions, depending on your needs and eligibility.

Your credit score

After budgeting, you need to check your credit score as this will decide if you can avail the amount you need. If your credit score is over 700, you should have no problem getting a loan. If the score is below 700, it’s time to focus on improving it.

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Prepare documents

Once your credit score and loan eligibility have been verified, you need to make a list of the documents you need to apply for the loan. You can either call the bank or check their websites to find out what documents you need. Applying for a home loan is easy. You can either apply online or go to the nearest bank branch. These days, bank officials may also come to your home to explain the procedure.

Compare interest rates

Now is the time to compare interest rates. Check out all the banks and their offers for borrowers like you. Compare interest rates and see which bank or financial institution is offering the best deal. You can take a call after reading the terms and conditions of the loan.

Apply for the loan

After having pre-selected the banks, you can then think of applying for a mortgage. Although it is advisable to apply with the bank you have an existing relationship with, it is not mandatory and you can apply anywhere you think you will get a good deal.

Loan disbursement

Once your loan application has been approved, the bank will communicate it to you and ask you to come to the bank to sign the loan agreement. You can go to the bank with all the relevant original documents and read the loan agreement carefully. Carefully check your details, property details and amount. Also check the interest rate you are being charged. Once you are convinced of the correct details, you can sign the document. The bank will inform you of the disbursement date.

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Property register

After disbursing and owning the loan, you can complete the loan registration process by paying the stamp duty and registration fee. The bank will keep the original registration document until you repay the loan in full. It is advisable to pay your EMIs on time without frequent delays and avoid defaulting on your loan. Banks can auction off the property and collect the arrears if you don’t repay your home loan. Once you have fully repaid your loan, you can go to the bank and collect your original property papers.

It is essential to know that the interest rates are negotiable, so you can take advantage of this opportunity if your credit score is higher and your credit history is clean. The table below compares the lowest interest rates on home loans. You can check the banks and HFCs, their interest rates and EMIs on the loan amount of Rs 50 lakh for a term of 20 years.

Top 20 Banks and HFCs with Lowest Interest Rates on Home Loans

Compiled by

Note: The lowest interest rate on home loans for all listed public and private banks (BSE) and HFCs listed on the NHB website that offer home loans are considered for data compilation; Banks/HFCs for which data is not available on their website are not included. Data collected from respective bank/HFC website as of 04 October 2022. Banks and HFCs in their respective sections are listed in ascending order on the basis of interest rate, i.e. bank/ HFC offering the lowest interest rate at home loan (regardless of loan amount and term) is placed at the top and the highest at the bottom. The lowest rate offered by the bank/HFC is taken into account in the table. The EMI is calculated on the basis of the interest rate mentioned in the table for the Rs 50 Lakh loan with a tenor of 20 years (processing fees and the like are assumed to be zero for the calculation of the EMI).

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