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Wednesday 29 January 2020

Home loan interest rates: Know how much you pay per lakh

Since many banks have chosen the repo rate as an external benchmark, a home loan will become cheaper immediately when the repo rate decreases

If you are thinking of buying a house, there is good news for you. Many banks have reduced the interest rate on home loans. State Bank of India has announced a 0.25% reduction in the external benchmark index in the new year, bringing its home loan rate down from 8.05% to 7.80%. The new rate has come into effect from today.

In Budget 2019, the government had already announced home loan seekers would get Rs 1.5 lakh more of rebate (make it a Rs 3.5 lakh rebate now) in tax on affordable housing loans.

On 1 October 2019, on the instructions of the Reserve Bank (RBI), more and more banks chose the repo rate as an external benchmark. Now onwards, a home loan will become cheaper immediately when the repo rate decreases.

Banks can choose the external benchmark rate to a spread of 2.65% of the repo rate. Currently, the repo rate is 5.15%. A bank offers loans at different interest rates to the salaried class and business people.

Salaried classSalaried classBusiness classBusiness class
BankRLLR No.From (%)To (%)From (%)To (%)With effect from
Syndicate Bank5.157.858.157.858.201 Nov
Punjab National Bank7.807.958.705 Oct
Central Bank of India8.008.008.3010 Oct
United Bank of India-EBLR7.858.008.151 Nov
Oriental Bank of Commerce7.958.008.555 Oct
Canara Bank8.058.0510.057 Nov
UCO Bank8.058.058.05 5 Oct
Bank of India8.008.108.408.109.0010 Oct
Corporation Bank7.908.10 8.3515 Nov
Bank of Baroda8.158.159.151 Dec
Andhra Bank 8.108.159.301 Nov
United Bank of India-RLLR7.708.158.151 Nov
Union Bank of India88.209.3511 Oct
Bank of Maharashtra8.208.208 Oct
SBI Term Loan8.058.208.358.558.701 Oct
Indian Overseas Bank8.008.208.451 Nov
Indian Bank7.958.208.458.308.551 Nov
IDBI Bank8.258.258.608.358.8012 Oct
SBI Max Gain8.058.458.808.608.951 Oct
Allahabad Bank5.158.5010.50
Axis Bank5.158,559.208.659.402 Nov
Federal Bank5.158.558.658.608.7016 Oct
ICICI Bank5.158.608.958.759.104 Oct
Karur Vysya Bank7.958.65 12.507 Oct

Syndicate Bank, Allahabad Bank, Axis Bank, Federal Bank and ICICI Bank have an RLLR (Repo Linked Lending Rate) of 5.15%.

The RLLR is highest in IDBI Bank (8.25%) followed by Bank of Maharashtra (8.20%), Bank of Baroda (8.15%) and Andhra Bank (8.10%).

Tenure5 years10 years15 years20 years25 years
@8%Rs 2,028Rs 1,213Rs 956Rs 836Rs 772
@10%Rs 2,125Rs 1,322Rs 1,075Rs 965Rs 909
@12%Rs 2,224Rs 1,435Rs 1,200Rs 1,101Rs 1,053
@15%Rs 2,379Rs 1,613Rs 1,400Rs 1,317Rs 1,281

Use this table to calculate your loan affordability by multiplying the EMI that applies to the number of lakhs worth of your borrowing. For example, if you seek a loan of Rs 10 lakh, which you will repay in 10 years in 15 years at a rate of interest of 12%, your EMI amount will be 10 x Rs 1,435 = Rs 14,350.

If you are applying for a home loan, an amount of 1 lakh will attract different interests for 5 years, 10 years, 15 years and 20 years. The graph above explains how much annual interest will be charged at different periods according to the different rate of interest on a loan of one lakh.

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