Buying a home is a big step for most of us. It’s exciting, no doubt. But let’s be honest — paying a high interest rate for 20 or 30 years? That part is not so exciting.
In India, many people only think about the EMI. But what we forget is — even a small change in interest rate can cost us lakhs over time.
In this post, I will share some simple and useful tips to help you get the lowest home loan interest rate. No confusing words. No boring math. Just real things that can help you save money.
Let’s begin!
Why Your Interest Rate Matters So Much
In our country, most people feel — “EMI is affordable, toh all okay.”
But actually, it’s not okay.
Let’s take one example:
Say you take a ₹50 lakh loan for 20 years:
| Interest Rate | EMI | Total Interest Paid |
|---|---|---|
| 9.0% | ₹44,986 | ₹57.96 lakh |
| 8.0% | ₹41,822 | ₹50.37 lakh |
| 7.5% | ₹40,278 | ₹46.66 lakh |
You can clearly see how even 1.5% less rate saves you around ₹11 lakh!
That’s not small money. That’s maybe a car, or your kid’s school fees.
Types of Home Loan Interest Rates in India
Before we talk about how to get the lowest rate, let’s first understand the types of interest rates.
🔁 Floating Rate
- Changes with the market (usually linked to repo rate)
- Starts low, but can go up later
- Good if you expect rates to fall or stay low
🔒 Fixed Rate
- Stays same for 3 to 5 years usually
- EMI is fixed — so easy to plan
- But starting rate is mostly higher than floating
📌 In India, most people go for floating rate — especially if loan is for 15+ years.
What Decides Your Home Loan Interest Rate?
Banks don’t give the same rate to everyone. It depends on your profile.
Here are some main things banks check:
| Factor | Why It Matters |
|---|---|
| Credit Score | Shows how you repay loans. Higher score = lower interest |
| Income | High income means you’re less risky |
| Loan Amount | Bigger loans may get better deals |
| Property Type | Good area = lower rate sometimes |
| Job Type | Govt or MNC jobs are more trusted |
| Loan Tenure | Shorter tenure = lower rate |
| Co-Applicant | Adding your spouse can improve chances |
9 Simple Ways to Get the Lowest Home Loan Interest Rate
Let’s now talk about the main part — how to actually get the best rate.
✅ 1. Keep Credit Score 750 or More
- Always pay your credit card bill on time
- Don’t use full limit of credit card
- Don’t apply for too many loans at once
📌 Tip: You can check your score on CIBIL, Experian, etc. for free once a year.
✅ 2. Always Compare Rates Before Applying
Don’t just go to your salary bank and apply.
Use websites like:
- BankBazaar
- Paisabazaar
- Cred
- Or visit banks’ official sites
Even 0.25% less can save you lakhs in 20 years.
✅ 3. Apply with a Co-Applicant
If your spouse also earns, add them as co-applicant.
This improves eligibility and sometimes helps in getting better rate.
✅ 4. Choose Shorter Tenure (If You Can)
Loans with 15 years tenure mostly get slightly lower rate than 30-year ones.
But EMI will be more — so do this only if your income allows.
✅ 5. Use Your Salary Account Advantage
If your employer has tie-up with any bank, you may get special employee offers.
Even government employees get extra benefits in some public banks.
✅ 6. Don’t Accept Forced Insurance
Many banks will try to add home or life insurance in your loan. This increases your loan amount and EMI.
Always ask — “Is insurance optional?”
If yes, then take it only if you actually need it.
✅ 7. Refinance After Few Years
Let’s say after 3 years, your bank still charges 9%, but another bank is offering 8.2%.
You can transfer your loan and save money.
It’s called home loan balance transfer.
✅ 8. Prefer Public Sector Banks
In most cases, PSU banks like SBI, PNB, etc. offer lower floating rates compared to private banks and NBFCs.
Plus, their terms are more transparent.
✅ 9. Negotiate! Don’t Be Shy
You may not know this — but you can negotiate your interest rate.
If your credit score is good and income is stable, just ask the bank for a better deal.
They want your business. Use that!
Best Banks Offering Low Home Loan Rates in 2025
As per latest data (mid-2025), here are some starting rates:
| Bank/NBFC | Starting Rate | Processing Fee |
|---|---|---|
| SBI | 8.30% – 9.15% | 0.35% (max ₹10K) |
| HDFC Bank | 8.50% – 9.30% | Up to ₹3,000 |
| ICICI Bank | 8.40% – 9.20% | ₹2,500–₹5,000 |
| Axis Bank | 8.60% – 9.50% | 0.50% |
| LIC HFL | 8.45% – 9.25% | 0.25%–0.50% |
| PNB HFL | 8.70% – 9.75% | Variable |
📌 Please check official websites for latest updates before applying.
Fixed or Floating – Which is Better?
In most cases, floating rate is cheaper by 0.25% to 1%.
But fixed rate gives you stable EMI.
So what to do?
Best is: Start with floating. If rates rise too much in future, then switch to fixed.
Avoid fixed rate loans that have long lock-in and high charges for pre-closure.
How Credit Score Impacts Your Rate
| Credit Score | What You Can Expect |
|---|---|
| 800+ | Best offers and lowest rates |
| 750–799 | Good rates, fast approval |
| 700–749 | Higher interest, stricter terms |
| Below 700 | Very tough. May get rejected or high rate |
Pro Tip: If your score is low, wait for 3–6 months, improve it, and then apply.
Does Joint Loan Reduce Your Rate?
Not directly. But it helps in 2 ways:
- Bank sees higher combined income
- Two credit profiles = lower risk
So they may give better rate or remove processing fee.
Also, both applicants get tax benefits under Section 24b — up to ₹2 lakh each on interest.
Should You Switch Lenders If Rate Is High?
Yes, you should — if it makes sense.
Example:
You took loan at 9.5%. After 4 years, another bank offers 8.3%.
Switching can save ₹3–4 lakh.
But before switching, check:
- Processing fees
- Legal + valuation charges
- Foreclosure penalty (if any)
📌 Rule of thumb: Switch only if rate drops by 0.5% or more, and you have 10+ years left in loan.
Final Thoughts: Don’t Just Accept. Compare and Save.
Let’s quickly recap what we learned:
✅ Keep your credit score above 750
✅ Compare rates from 3–4 banks before deciding
✅ Avoid taking forced insurance with the loan
✅ Floating is better when rates are low
✅ Ask for better deal — don’t feel shy
✅ Recheck your rate after 3–5 years. Refinance if needed
A home loan is a 20-year journey for many of us. If we plan smartly, we can save lakhs — and that money can be used for better things in life.
So don’t rush. Take your time. Ask questions. And always read the fine print.
Thanks for reading! If this post helped you, do share it with friends or family who are planning to take a home loan.
Let’s help each other make better money decisions 🙌