Home Loans Rates Comparison

by Gopal Gidwani on September 12, 2010 · 48 comments

in Financial Planning

In the last few months keeping in mind the slowdown in credit growth and the excess liquidity in the financial system lot of banks have introduced dual rate home loan schemes (also known as Fix-O-Floaty Home Loan Schemes or Teaser Rate Home Loan Schemes) to woo the customers who are spoilt for choice. Banks are going all out to grab the maximum share of the customer’s wallet by introducing these enticing schemes or offers. There are primarily few reasons for why banks are coming out with these attractive offers:
1. Banks have lot of liquidity; but at the same time the demand for credit has not grown much. Instead of parking the money with the RBI under the Reverse Repo window they would prefer to lend it to the customers.
2. As the fears of the slowdown recede and economic outlook improves the real estate sector is picking up. The real estate sector was one of the hardest hit sectors due to the sub prime crisis
3. Cut throat competition among banks and housing finance companies is forcing each bank to come out with an innovative offer that is better than the existing home loan offers in the market. Most banks want to increase the share of retail assets among their overall portfolio.
4. Upcoming Diwali and Year end Festive Season: Normally during the festive season the demand for loans from customers increases. It is considered auspicious to buy assets during the festive season.

Due to the above reasons lot of banks have come out with dual rate home loan schemes. Under these schemes the interest rate is fixed for the initial few years and it becomes floating for the remaining tenure of the loan. The floating rate depends on the Base Rate of the bank. This means that if the Bank Base Rate goes up the interest rate on the home loan will move up and if the Bank Base Rate is revised downwards then the home loan rate will also move down along with the Base Rate. Due to the uncertain economic environment customers are hesitant to go for home loans. So banks are coming out with these dual rate home loan schemes so that the customer can be assured that his EMI would stay fixed atleast for the first few years during these times of uncertainity.

Even though in the home loan offers of most of the banks the interest rate is fixed for the first few years; the other terms and conditions like the loan tenure, the minimum and maximum amount, pre-payment clauses etc are different in case of each bank. Through this article we are trying to make a comparison of the existing home loan offers of few banks so that selection becomes a little easy for the customer. However the customer needs to check with the bank for the final terms and conditions as these offers may be subject to change.

 SBI BankHDFCPunjab National BankUCO BankCorporation BankLIC Housing Finance
Product NameSBI EasyDual Rate Product – 4PNB Festival Bonanza Offer 2010Festival Bonanza OfferCorp Home SmartAdvantage – 5
Year 1 Rate8%8.5% upto 31st March 20118.50%8.25%8.25%9.25%
Year 2 Rate9%9.5% upto 31st March 20128.50%8.75%9.25%9.25%
Year 3 Rate9%Floating8.50%9.00%9.25%9.25%
Year 4 RateFloating or FixedFloatingFloatingFloatingFloating9.25%
Year 5 RateFloating or FixedFloatingFloatingFloatingFloating9.25%
Year 6 OnwardsFloating or Fixed FloatingFloatingFloatingFloating
Maximum Loan AmountUpto 50 LakhsNo Loan Amount LimitUpto Rs 50 LacsUpto 1 CroreUpto 50 Lacs 
Processing and Documentation ChargesRs 7000 for Rs 10 Lacs – 50 Lacs Loan Waived OffWaived Off  
Margin Money20% 15% for loans upto 20 Lakhs   
Valid Upto30st Sep 2010Not Specified31st December 201031st December 201031st  December 2010Till Further Review

After having a look at the comparison let us have a detailed look at some of the home loan offers of some of the banks.
State Bank of India (SBI) Easy Home Loan Scheme:
• SBI has introduced this scheme for Home Loans upto Rs 50 Lacs
• Interest rate is fixed at 8% for the 1st Year and 9% for the Second Year and the 3rd Year.
• After 3 years the customer can opt for a fixed rate or a floating rate and accordingly the interest rate will be revised by the bank.
• SBI Bank has a reach of more than 12000 branches nationwide making it easier for the customer to approach the bank in any part of the country.

Punjab National Bank (PNB) Festival Bonanza Offer 2010 for Housing Loans and Car Loans
• The “PNB Festival Bonanza Offer 2010” is in continuation of several measures initiated by the bank in the recent past to make its retail lending schemes ‘Customer Friendly’. The scheme has been launched on 18th August 2010 as per the press release from the Bank.
• Under this scheme PNB Bank is offering Home Loans of upto Rs 50 Lacs at a fixed interest rate of 8.5% for the first 3 years.
• The Bank has also fully waived off the upfront Processing Fee and Documentation Charges
• The margin for home loans upto 20 Lacs has been reduced to 15%.
• The scheme is valid till 31st December 2010

UCO Bank “Festival Bonanza Offer”
• On 6th September UCO Bank has launched the “Festival Bonanza Offer” for Home Loans, Trader Loans, Two Wheeler Loans and Car Loans.
• For Home Loans the interest rate is fixed for the first 3 years at 8.25% for the 1st Year, 8.75% for the 2nd Year, 9.00% for the 3rd Year.
• The Processing and Documentation Charges have been waived off completely.
• For the above interest rates the minimum loan tenure should be 5 years and the upper loan amount ceiling is upto 1 Crore
• After the first 3 years the interest rates will become floating as per the prevailing interest rates at that time.
• The scheme is valid till 31st December 2010.

HDFC Limited “Dual Rate Product – 4”
• HDFC Limited has launched “Dual Rate Product – 4” under its latest Fix-O-Floaty home loan scheme.
• Under this scheme the interest rate will be fixed at 8.5% till 31st March 2011.
• The interest rate will be fixed at 9.5% from 1st April 2011 to 31st March 2012. After that the home loan will become floating.
• The above rates will be applicable irrespective of the loan amount applied for.
• The offer is applicable only for those new customers who apply on or before 30th September 2010 and take atleast part disbursement before 31st October 2010.
• This scheme is also applicable to Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs).

LIC Housing Finance Limited (LICHFL) “Advantage 5”
• LIC Housing Finance (LICHFL) has come out with a new home loan product “Advantage 5”.
• Under this product the interest rate on the home loan is fixed at 9.25% for the first 5 years. Thereafter the home loan becomes a floating loan
• This product is beneficial for those home loan borrowers who are looking for a fixed lending rate for a long period as the current economic scenario is very unpredictable and it is hard to predict which side the interest rates are headed.
• The scheme rates are effective from 1st July 2010 and will continue till further review from the company side.
Apart from ‘Advantage 5’ LIC Housing Finance has one more dual rate product for home loan borrowers. Under this Fix-O-Floaty product the interest rate is fixed at 8.90% till 31st March 2012 and thereafter floating. The maximum loan amount ceiling for this product is 1.5 Crores.

Corporation Bank “Corp Home Smart” (CHSMT)
• On 19th July 2010 Corporation Bank unveiled a new home loan product under is existing “Corp Home Smart” (CHSMT) product.
• The scheme is applicable for loans upto 50 Lacs.
• The interest rate is fixed at 8.25% for the 1st Year and 9.25% for the 2nd Year and 3rd Year.
• The scheme is applicable only for new home loan applications which are sanctioned and disbursed on or after 19th July and upto 31st December 2010.

Conclusion
The Dual Rate Loans or Teaser Loans offered by these banks are good for people who are not sure of their cash flows and want to lock-in the interest rates for a brief period of time. From the above home loan schemes offered by 6 banks the longest fixed rate tenure offer is from LIC Housing Finance ‘Advantage 5’ wherein the fixed rate offered is 9.25% for 5 years. But the interest rate charged is on the higher side which is 9.25%. The lowest rate charged is 8.5% for all three years by Punjab National Bank under its Festival Bonanza Scheme. PNB Bank also has low margin at 15% and has waived off the entire Processing and Documentation Charges.

Please Note:
• The objective of this article is not to favour one bank over the others. The objective is just to make the customer aware of the home loan schemes being offered by various banks in the market. The customer needs to make his/her own choice based on the offer that best suits his/her requirement.
• The interest rates and all the other information has been sourced from the websites of the respective banks offering these schemes. Customers are advised to contact the bank and confirm all the details of the scheme with the bank before deciding on the final scheme to go for.
• In case of most of the banks; for new customers the fixed rates being offered are subject to the bank’s Base Rate. The interest rate will not be below the base rate of the bank.

For people who already have a home loan and would like to repay their home loan early and save on interest and reduce the number of EMI’s the below article will be helpful Home Loan Repayment Options

Please let us know your comments on the article by commenting in the section below or writing to us at gopal_gidwani@yahoo.com

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{ 45 comments… read them below or add one }

Tanushree Saikia September 13, 2010 at 9:45 am

Hey Gopal,

This comparision chart is extremely useful. To collate this kind of information from all the banks takes days. You are saving a lot of our time and effort . Thanks : )

Reply

Gopal Gidwani September 13, 2010 at 10:19 am

Hi Tanushree,

Thanks for the comment. I hope the article info helps you in your search for a Home Loan ……… 🙂

Reply

sunil September 13, 2010 at 10:12 am

Overall good info…Can anybody tell me that Which bank is offering loan repayment period upto 25 years..

Reply

Gopal Gidwani September 13, 2010 at 10:43 am

Hello Mr. Sunil,
Banks like Corporation Bank, Bank of Baroda, Canara Bank, Dewan Housing Finance Limited, Citibank and HSBC Bank are some of the banks that are giving Home Loans where the repayment can extend upto 25 Years.

Reply

Tess September 13, 2010 at 2:32 pm

Hi Gopal,
Great piece of Information. 🙂
Tess

Reply

Gopal Gidwani September 13, 2010 at 2:45 pm

Hi Tessena,
Thanks for the compliment …………. 🙂

Reply

Amitav September 14, 2010 at 4:15 am

Hey Gopal,
Very useful information! Nice Article!

Reply

Gopal Gidwani September 14, 2010 at 4:30 am

Hi Amitav,
Thanks a lot ………… 🙂

Reply

Anand September 17, 2010 at 5:41 am

Thanks Gopal for sharing across.

Reply

Gopal Gidwani September 17, 2010 at 6:10 am

Hello Mr. Anand,

Thanks a lot ………… 🙂

Reply

Prafulla Raut September 17, 2010 at 5:42 am

Hi Gopal,
Good information .Like your Article

Reply

Gopal Gidwani September 17, 2010 at 5:46 am

Hi Prafulla,
Thanks a lot ……….. 🙂

Reply

Mandar September 20, 2010 at 7:13 am

Nice article Gopal, thanks for sharing!

Mandar

Reply

Gopal Gidwani September 20, 2010 at 10:21 am

Thanks Mandar ………… 🙂

Reply

Manthan September 23, 2010 at 4:00 am

Its very useful information Gopal. Thanks a lot for sharing this with us…!!!

Reply

Ajeet October 7, 2010 at 7:16 am

Really helpful info 🙂

Reply

Gopal Gidwani October 7, 2010 at 7:37 am

Hi Ajeet,

Thanks for the Compliment ………….. 🙂

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Rajan November 9, 2010 at 5:18 am

Nice work Mr.Gopal, You really saved my time.
Iwould like to go for Advantage-5 plan from LIC housing finance.Also I heard that it is available only till Nov 15.Is that really so ? If so,It ll not be possible for me to avail it Hence,Could you suggest me any other good plan from LIC HFL( 20 years – 17 Lakhs)
Thanks in advance !

Reply

Gopal Gidwani November 11, 2010 at 4:05 pm

Hello Mr. Rajan,

Regarding your query on whether 15th November is the last date for Advantage-5. To find out I went to the LIC Housing Finance Website and I was surprised to see most of the links on the website are not working. The pages are not opening. So I cant comment on the last date of Advantage-5. Infact last time also when I had been to their website the links were not working. I got the information for my article from one of their Press Releases.

Regarding other products of LIC HFL they have a product by the name of Fix-O-Floaty. Under this product home loans are offered at rates of 8.90% fixed upto 31.03.2012 and after that the loan becomes floating.

Reply

Rajan November 12, 2010 at 8:41 am

Thank you very much for your effort,Mr.Gopal !
Even I tried surfing through LIC HF website but ended in vain .
As far as I enquired with with friends, they suggest me to go for LIC HF (
(next to SBI,where the process takes more time) as it is transparent without any hidden charges..Could I have your valuable opinion please,Mr.Gopal as I ‘ve decided to go LIC HF.

Reply

Gopal Gidwani November 12, 2010 at 11:07 am

Hello Mr. Rajan,

In my opinion you can go for LIC HF as they are offering a good deal on the home loan interest front. Also I believe LIC HF is a good organisation to go for a loan in terms of transparency. They may not have hidden charges but read the terms and conditions of the home loan agreement carefully before signing on the dotted line so that you dont get any surprises in future from them.

Reply

Naveen December 28, 2010 at 11:05 am

Hi,

I have chosen LIC housing finance but i m also interested in Bank of baroda as their processing fees is nil and nationalized bank security…after 5 years of LIC, how they (LIC) compute their interest rate…do they hugely raise their interest rate without subject RBI or RBI has some role to define interest rate…..Bank of baroda is charging 9.25 floating from the starting…m a salaried person

can you help me out

Reply

Gopal Gidwani December 28, 2010 at 3:38 pm

Hello Mr. Naveen,
The rate that will be charged by LICHFL after 5 years will depend on the Base Rate of the bank at that time. They just give you an indicative rate now by mentioning that the floating rate will be up by say 200 basis points (2%) or 300 basis points (3%) over and above the base rate at that time. So if the base rate at that time is 9% then the floating rate will be 9+2=11% or 9+3=12% as specified by the bank by how many basis points the floating rate will be above the base rate. These are just examples and not actual interest rate.
I hope I have answered your query. You can go for LICHFL as your interested rate will be locked for 5 years in this rising interest rate scenario where RBI is regularly increasing interest rates to control inflation.

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Naveen December 29, 2010 at 9:17 am

hey thanks gopal for such a quick help…
now my concern is that time, after 5 years how LIC will compute the interest rate. RBI has some guidelines over this..is it possible LIC suddenly increase their interest rate after 5 years and charge very high while other banks wont…is it set by RBI or LIC self can increase their Base rate or PLR..
and by anyhow floating rate will come down. In history it did’t happened..

Thanks

Reply

Gopal Gidwani December 29, 2010 at 11:37 am

Hello Naveen,

RBI just gives guidelines through monetary policy on interest rates. RBI has no direct role to play in setting interest rates. Also LICHFL cannot abruptly increase interest rates after 5 years and charge you a higher rate. Interest rates are a function of money demand and supply. If after 5 years LICHFL charges you a higher rate of say 12% and some other bank is offering loans at say 9% then LICHFL also knows that you will transfer the loan to that bank. LICHFL will not want their customers to transfer loans to other banks. So all banks offer competitive rates so that their customers do leave them. Same applies to LICHFL. So dont worry about it.

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Naveen December 29, 2010 at 11:52 am

thank you so much sir….u dont know u helped me to great extent..timely response!! highly appreciate 🙂

thanks thanks

Vishal January 24, 2011 at 4:36 am

Hi Gopal,
I am looking for a home loan around 65 lacs for purchasing an apartment. I looked for couple of options like SBI, Axis & LIC. Out of these LIC seems to give longest fixed rate scheme (9.5% for first 5 years, floating thereafter). SBI and Axis are giving only floating rates at this time. I am not sure if LIC floating rate may go abruptly higher later as it is based on PLR scheme whereas others have moved to base rate scheme now. Can you help understand this concept & choose an appropriate lender? Thanks in advance.

-Vishal

Reply

Gopal Gidwani February 7, 2011 at 2:54 pm

Hello Vishal,
You can go for LIC Housing as you will be able to lockin your interest rate for 5 years. Whether the interest rates will abrupty go high or low after 5 years; well 5 years is a long time and no one can predict what will be the interest rate scenario after 5 years. But whatever will be the interest rates 5 years down the line it will apply for home loans of all banks be it LICHFL or SBI or Axis

Reply

Naveen March 2, 2011 at 11:41 am

Hi Gopal,

Again i need your help, i have taken the loan from LIC of rs 18,00,000 (20 years/ 9.5 interest rate) and EMI started from march of rs 17500 (approx).
Pls suggest me is it a good decision to start that much EMI from immediately taking the loan, or other options also there to intelligently repay the loan.
loan taken for under construction property, property will take 3 years to get possessed

thanks for your help

Reply

Gopal Gidwani March 2, 2011 at 11:57 am

Hi Naveen,
You can start with this EMI of Rs. 17,500 provided this does not form more than 40% of your salary and you have enough additional free cashflows to take care of your other financial goals like investing for your children’s education and marriage, your retirement, your other loans like vehicle, personal loans should you have any. You can go on increasing your EMI by 5% or 10% every year compounded. If you increase your EMI by 10% compounded every year, you will be able to repay the 20 year loan in less than 10 years. Also higher the principal amount you repay, higher is tax benefit you can claim on it under Section 80C without making any other investments and blocking your money.

Reply

Naveen March 2, 2011 at 12:05 pm

hey thanks for the advice. To be more clear, my installment is 50% of my salary and i m unmarried, no any other loans, living with parents and age 25.

then what do you suggest…

harsha vardhan February 23, 2011 at 3:42 pm

I think base rate home loans are good.In other banks Prime
lending Rate decreases they will
not decrease the rate of interest
& the benefit is not passed on to
the existing customers.
For the benefits of going with
base rate please find the
fallowing link:
http://
timesofindia.indiatimes.com/
business/india-business/RBI-
changes-prime-lending-rate-
system-to-base-rate/
articleshow/5558281.cms

Reply

Gopal Gidwani March 2, 2011 at 9:58 am

Hi Harsha,
Most banks will shift or have already shifted all their loans to base rate. So now every change in the base rate will reflect in the loan rate

Reply

Naveen February 28, 2011 at 8:19 am

Hi Gopal,

Again i need your help, i have taken the loan from LIC of rs 18,00,000 (20 years/ 9.5 interest rate) and EMI started from march of rs 17500 (approx).
Pls suggest me is it a good decision to start that much EMI from immediately taking the loan, or other options also there to intelligently repay the loan.
loan taken for under construction property, property will take 3 years to get possessed

thanks for your help

Reply

Harshanand October 12, 2011 at 3:48 am

Hi Gopal,

I had gone in for Corp Home Smart (at an interest rate of 8.75, 9.75 and 9.75 respectively) and they have increased the interest rate as and when the interest rates have increased. And now it stands at around 11pc. On asking they had said that this is discounted 1 pc from actual rates and not really fixed. Is that true? But on looking at this article I am having second thoughts.

Thanks,
Harsha

Reply

Harshanand October 12, 2011 at 3:49 am

Please note my loan was around 2010 October when Corp Home Smart was available.

Reply

Gopal Gidwani October 13, 2011 at 7:31 pm

Hello Harsha,
When I wrote this article in September 2010, Corporation Bank was offering interest rate of 8.25, 9.25 and 9.25 fixed for the first 3 years. They came out with this product in July 2010. In your case the rates are different at 8.75, 9.75 and 9.75. So may be you could have gone for a different variant of the product. In 2009 and 2010 many bank had come out with teaser rate home loan products and over a period of time banks kept introducing these products with different variants with tweaking in the interest rates and other terms. Also check the fine print in your home loan agreement on whether any such clause is mentioned that you interest rate is 1% discount to actual rates. Is your loan linked to the base rate??

Reply

Arun Kumar December 13, 2011 at 5:02 pm

Hi,
I have taken the Loan @ LIC HFL – advantage 5 Plan, Whether i can pay some principal amount and reduce the Principal or tenure years, If so what is the maximum amount i can pay, Please help me

Thanks in Advance

Reply

Gopal Gidwani December 14, 2011 at 4:47 am

Hello Mr. Arun,
You will have to inquire with LICHFL Customer Care on how much amount you can prepay and after how much time. Some companies have a pre-payment limit of 25% of the outstanding loan amount. Some companies don’t allow any pre-payment within the first 6 months or 1 year. So these things differ from company to company. I will suggest when you go for pre-payment, reduce the tenure of the loan rather than reducing the EMI. This will help you in finish the loan earlier than the scheduled tenure

Reply

Vineetha Vijayan January 4, 2012 at 11:33 am

Hi Gopal,

My husband and I had opted for a loan under the PNB festival bonanza offer 2010. ROI:@8.50%(Fixed with a reset clause of 3 years, first reset on 01/04/2014), repayment in 60 EMIs@Rs.20370/-.We started paying the EMIs from Oct 2010. Some days ago, I received a registered letter from PNB stating the following:
1) There has been an upward revision in the Interest rate under the retail loan segment due to increase in Bank’s Base r
Rate/BPLR lately.
2) In view of the above it is requested that you may continue to pay your existing EMI with condition that the balance outstanding in your account would be paid in one go with your last EMI of the originally applicable repayment tenor.
3)A consent slip is attached for us to sign and send back to the bank.

We could not fully understand the clause no.2 mentioned above. Could you please help us with the same.

Reply

Gopal Gidwani January 9, 2012 at 1:03 pm

I think they are talking about increase in EMI. I mean to maintain the same EMI, you need to make a one-time pre-payment which will offset the increased outstanding amount as a result of the increase in interest rates. For more clarity please visit the bank and ask the bank officials. They will be the best persons to guide you on this.

Reply

Nirmal Singh June 16, 2013 at 8:13 am

I am a Farmer, Want Home Loan. Which bank is good ?

Reply

Gopal Gidwani June 16, 2013 at 9:26 am

Hello Nirmal,

You may have a look at SBI MaxGain Home Loan from State Bank of India. It is a good home loan product.

Reply

Amol Banpatte January 5, 2014 at 9:33 am

Hi Gopal,
Need ur help again..
My home loan is with LICHFL with 12% interest rate which I think ia a very much unreasonable.I m planning to switch it to other bank. The balance amount is Rs. 1650000.can you please guide me which bank is good to switch the home loan.
And can please explain what is difference between base rate & rprl.
regards,
Amol

Reply

Gopal Gidwani February 4, 2014 at 6:13 pm

Hello Amol,
You may consider shifting to SBI and opt for SBI MaxGain

Reply

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