Best banks to get your home loan in 2021


As home loans are a long-term commitment, we offer some tips on how to choose a bank that serves you well throughout the loan tenure

With the second wave of the Coronavirus pandemic adversely affecting the economy, the Reserve Bank of India (RBI), on June 4, 2021, decided to keep the repo rate unchanged amid rising pressure on the banking regulator to offer liquidity support to the economy. With home loan interest rates already at record lows, the year 2021 is possibly the best time to purchase a property using borrowed capital. This is especially true, if you also keep in mind the discounts offered by developers and the reduction in stamp duty announced by various state governments.

However, it may be quite confusing for a home buyer to select the best financial institution to borrow the home loan from, while evaluating not only the lowest interest rates only also the overall effectiveness of the bargain. To make things easier for borrowers, we list here the best banks to get a home loan from in 2021.

Note: As the interest charges will always be the single-biggest influencer in driving the borrower’s decision, we have listed the banks that offer you the most affordable deals, currently. However, while making the list, we have also determined the banks’ loan affordability, by factoring in the fringe charges. Also note that the rates mentioned in this article are with regard to the floating rate of interest, linked with the RBI’s repo rate and not the previous marginal cost of funds-based lending rate (MCLR) regime, or base rate or prime lending rate regimes.

 

Factors that affect home loan EMI outgo

 

State Bank of India (SBI)

The largest mortgage lender in India, government-run State Bank of India (SBI) has assisted over 30 lakh families in their home purchases till date. Established in 1955, the lender also has over 24,000 branches in India and abroad.

 

SBI home loan interest rate

Rate of interest on home loansBest rate*Highest rate*
For salaried individuals6.7%7.05%
For self-employed individuals7%7.40%

*Rate applicability from May 1, 2021

Longest tenure: 30 years

Processing fees: 0.40% of the loan amount, subject to a minimum of Rs 10,000 and a maximum of Rs 30,000 with GST. For projects where the bank has a tie-up with the builder, the rate will be 0.40% subject to a maximum of Rs 10,000 plus taxes.

Affordability scale: High

Advantages: The government-run bank is always among the first ones to reduce its interest rates, in case the RBI lowers the repo rate. It also makes perfect sense to rely on one of the best-performing Indian banks to meet your borrowing needs. The great financial health of the bank also gives borrowers a reason to stick with SBI.

Disadvantages: The number of documents that applicants have to submit are high considering the bank employs strict due diligence to affirm the creditworthiness of the borrower. The best rate of interest is also offered to borrowers with credit scores of 750 and above.

 

HDFC

Established in 1977, HDFC has helped over 80 lakh people purchase their homes till date. It is important to note here that HDFC, a Mumbai-headquartered housing finance company (HFC), should not be confused with HDFC Bank, even though the two entities are part of the same HDFC Group.

 

HDFC home loan interest rate

Rate of interest on home loansBest rate*Highest rate*
For salaried individuals6.75%7.40%
For self-employed individuals6.75%7.85%

*Rate applicability valid from March 4, 2021

Maximum tenure: 30 years

Processing fees: Up to 0.50% of the loan amount or Rs 3,000, whichever is higher.

Affordability scale: High

Advantages: HDFC is also among the first HFCs to reduce rates after the RBI announces rate cuts. As part of a highly successful group, the HFC also has great scope to offer benefits to its customers.

Disadvantages: The best rates by HDFC are available to borrowers with a credit score of at least 750. You will not be able to get these rates in case of lower scores.

See also: Home loan interest rates and EMI in top 15 banks

 

ICICI Bank

ICICI Bank, the country’s second-largest private lender by market-capitalisation, was originally promoted in 1994 by ICICI Limited and was its wholly-owned subsidiary. ICICI Bank currently has a network of 5,288 branches across India.

 

ICICI Bank home loan interest rate

Rate of interest on home loansBest rate*Highest rate*
For salaried individuals6.75%7.95%
For self-employed individuals6.95%8.05%

*Rate applicability from March 5, 2021

Maximum tenure: 30 years

Processing fees: 0.50% of the home loan amount.

Affordability scale: High

Advantages: One of the most customer-friendly banks, ICICI Bank is also quick in offering rate transmission benefits. The ease of conducting business on its various online platforms is also remarkably easy, unlike some other banks.

Disadvantages: Since the bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its group companies, you could expect a lot of cold calls.

 

Bank of Baroda

The Vadodara-headquartered Bank of Baroda became the third-largest bank in India after SBI, after its merger with Dena Bank and Vijaya Bank in April 2019. Founded by the maharaja of Baroda in 1908, the bank, along with 13 other major commercial banks of India, was nationalised on July 19, 1969, by the government and currently operates more than 10,000 branches in India and abroad.

 

Bank of Baroda home loan interest rate

Rate of interest on home loansBest rateHighest rate
For salaried individuals6.75%*9%
For self-employed individuals7%9%

*Effective from March 15, 2021.

Maximum tenure: 30 years

Processing fees: None currently

Affordability scale: High

Advantages: The process to get a loan is very easy on the online platform.

Downside: People with poor credit scores will find the cost of borrowing higher and should, thus, focus on getting credit from HFCs or NBFCs.

 

Punjab National Bank

The second-largest public sector bank in India, Punjab National Bank (PNB) is also currently offering home loan interest rates at affordable rates. The New Delhi-headquartered state-owned bank was founded in 1894 and has over 80 million customers and 6,937 branches across 764 cities.

 

Punjab National Bank home loan interest rate

Rate of interest on home loansBest rateHighest rate
For salaried individuals6.80%7.40%
For self-employed individuals6.80%7.40%

Maximum tenure: 30 years

Processing fees: None from January 1, 2021 to March 31, 2021. Typically, it is 0.35% of the loan amount, with the lower and upper limit capped at Rs 2,500 and Rs 15,000, respectively.

Affordability scale: High

Advantages: The temporary waiver in processing fee lowers the overall expense for the borrower. People with good credit scores are also invariably rewarded by the bank.

Disadvantages: The bank’s image has suffered major setbacks in the recent past amid a dramatic surge in toxic loans and its alleged involvement in fraud cases. Also, borrowers might find the services much less customer-friendly than most private lenders.

See also: How to avoid a bad credit score

 

LIC Housing Finance

A subsidiary of LIC, the company has so far approved over 3.35 lakh home loans.

 

LIC Housing Finance home loan interest rate

Rate of interest on home loansBest rateHighest rate
For salaried individuals6.90%7.80%
For self-employed individuals7%7.90%

Maximum tenure: 30 years

Processing fees: 0.25% of the loan amount, with the upper limit capped at Rs. 10,000.

Affordability scale: Average

Advantages: LIC HFL offers 90% of the property value as home loan.

Disadvantages: Interest rates are not as low as some of the leading Indian banks.

 

Canara Bank

Founded in July 1906 at Mangalore, Karnataka, Canara Bank was nationalised in 1969. This bank which is over a century old, has its headquarters in Bengaluru and operates over 10,391 branches across India. Last year, Canara Bank became the fourth-largest state-owned bank by assets after its merger with Syndicate Bank assuming a business size of over Rs 16 trillion.

 

Canara Bank home loan interest rate

Rate of interest on home loansBest rateHighest rate
For salaried individuals6.90%8.90%
For self-employed individuals6.90%8.90%

 

Maximum tenure: 30 years

Processing fees: 0.50% of the loan amount with the minimum and the upper limit capped at Rs 1,500 and Rs 10,000, respectively.

Affordability scale: Average

Advantages: You could repay your loan till you attain the age of 75 years. This means people purchasing their home in their middle ages, will find this bank more fitting.

Disadvantages: For a higher loan size, you will have to make a contribution of up to 25% of the property’s value. Unlike most banks, Canara Bank also charges a processing fee on home loans even now.

 

Union Bank

This Mumbai-headquartered public lender is currently offering the cheapest home loans in the market. A limited company, the bank has a network of over 9,500 domestic branches.

 

Union Bank home loan interest rate

Rate of interest on home loansBest rateHighest rate
For salaried individuals6.70%7.15%
For self-employed individuals6.90%7.35%

Maximum tenure: 30 years

Processing fees: 0.50% of the total loan amount with the upper limit capped at Rs 15,000.

Affordability scale: High

Advantages: Currently the best bank to apply for a home loan, this state-run lender would offer you a loan if you are 18 years of age, unlike most banks who offer home loans to people over 21 years. There is also no limit on the quantum of the loan you could borrow from here.

Disadvantages: Though the rates at Union Bank are currently the lowest, the transmission of downwards changes is typically not very fast.

 

HDFC Bank

Those who find it more comfortable to stick with a bank rather than a HFC could apply for a home loan at HDFC Bank, the baking subsidiary of the HFC, HDFC. Incorporated in 1994, the bank has a nationwide network of 5,430 branches.

 

HDFC Bank home loan interest rate

Rate of interest on home loansBest rateHighest rate
For salaried individuals6.80%7.85%
For self-employed individuals6.80%7.85%

Maximum tenure: 30 years

Processing fees: Up to 0.50% of the loan amount or Rs 3,000, whichever is higher.

Affordability scale: Average

Advantages: The bank is comparatively fast in transmitting benefits of policy rate cuts.

Disadvantages: The process to get your loan approved may be longer, considering that the bank would demand a great deal of documents and carry out several checks, to avoid bad loans. This has been instrumental in keeping the bank’s financial health in check, even during the worst of the financial crisis.

 

Axis Bank

A leading private sector bank established in 1993, Axis Bank currently runs around 4,500 branches in India and abroad.

 

Axis home loan interest rate

Rate of interest on home loansBest rateHighest rate
For salaried individuals6.90%8.40%
For self-employed individuals7%8.55%

Maximum tenure: 30 years

Processing fees: Up to 1% of the loan amount, with the minimum amount capped at Rs 10,000.

Affordability scale: Average

Advantages: The bank is a pioneer in terms of rewarding credit-worthy individuals and has been among the first to offer them lower rates of interest.

Disadvantages: While most banks offered a processing fee waiver in view of the festive season and the Coronavirus pandemic starting October 2020, Axis Bank continues to charge this duty. Also, the processing fee of this bank is comparatively higher than what is charged by other banks.

 

Things to keep in mind

  • Amid increasing delinquency rates, almost all banks now offer their best interest rates only to applicants with good credit scores. As mentioned earlier, a credit score above 700 qualifies as a good credit score.
  • Changes in the repo rate will not immediately reflect in your home loan EMI payments. Rates are reset by banks at fixed intervals.
  • Be mindful that banks cannot charge a penalty for prepayment of home loans linked with the floating rate of interest.

 

FAQs

What is the repo rate?

The repo rate is the interest that India’s apex bank, the RBI charges from scheduled banks in the country, to offer them funds. Whenever there is a tweak in the repo rate, the banks also increase or decrease the interest rates for the common man.

How is an HFC and a bank different?

While banks are also engaged in various other activities, HFCs purely engage in the function of providing home loans.

My credit score is poor. Will I have to pay higher interest rates?

Most Indian banks now offer their best rate to customers with impressive credit scores. This means, borrowers with poor scores will be asked to pay higher interest.

 

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