Home loan rate is the number everyone compares. It's also the least important variable for 80% of borrowers — what matters more is eligibility, processing speed, and hidden costs.
A 0.25% difference in interest rate on a ₹60L loan over 20 years = ₹1.8L total. The wrong lender can cost you ₹3–5L in processing time delays, legal charges, and prepayment penalties.
Banks evaluate: (1) CIBIL score — 750+ is the effective floor for the best rates; 650–749 gets approval but at 0.25–0.5% higher rate; below 650 means rejection at most banks. (2) Net income stability — salaried employees at large companies get better terms than self-employed. (3) Fixed Obligation to Income Ratio (FOIR) — your existing EMIs + new EMI should not exceed 50–55% of net income. (4) Age — most banks want the loan to complete before 60–65. If you're 45, you may be capped at 15 years. (5) Property type — under-construction properties have slower disbursal and stricter review.
Most home loans in India are floating — linked to Repo Rate via RLLR (Repo-Linked Lending Rate). Floating rates are transparent but change with RBI policy. Fixed rates are 0.5–1.5% higher but give certainty. In a falling rate cycle (like India in 2020–21), floating wins. In a rising cycle (2022–23), fixed wins. As of mid-2026, rates are stable post their peak — floating remains the better choice for a 15–20 year loan. The option to switch from floating to fixed later exists but incurs a fee.
Read the loan sanction letter carefully before signing. Watch for: (1) Processing fee: 0.25–1% of loan amount. Negotiate. Most banks waive or halve it for salaried employees. (2) Legal and valuation fee: ₹5,000–₹20,000. Sometimes bundled, sometimes charged separately. (3) Prepayment penalty: RBI banned prepayment penalty on floating rate home loans in 2012 — confirm this is not in your agreement. (4) Mortgage Guarantee Insurance (MGII): banks sometimes make this appear mandatory — it's not. (5) Home insurance: not mandatory, but often pushed during disbursal.
Under the old tax regime: Section 80C — principal repayment of home loan is eligible for ₹1.5L deduction per year. Section 24B — interest on home loan is deductible up to ₹2L per year for self-occupied property (unlimited for let-out). Section 80EEA — first-time buyers get an additional ₹1.5L deduction on interest (on loans sanctioned between April 2019–March 2022). Under the new tax regime: no deductions available for home loan interest on self-occupied property, but Section 80EEA loans retain the benefit for rental properties. Use our Tax Benefits Calculator to compute your exact annual tax saving.
Get a bank pre-approval (also called in-principle sanction) before searching for a property. Pre-approval confirms your eligibility and loan amount, strengthens your position in negotiations (sellers prefer buyers with confirmed financing), and speeds up the final disbursal once you finalize the property. Pre-approval typically takes 3–5 working days and doesn't commit you to a loan.
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