Home Loan Interest Rate

Why should you choose HDFC Bank for a home loan?

Choosing HDFC Bank for your home loan comes with several compelling advantages. HDFC Bank, recognizing the significance of owning a home, provides Home Loans designed to simplify the process of building your dream living space. With attractive home loan interest rates and easy repayment facilities, HDFC Bank ensures that your journey to homeownership is not only achievable but also financially favorable. Beyond competitive home loans rates, HDFC Bank offers loan packages that make financing straightforward, aligning with your financial goals. When you choose HDFC Bank for your home loan, you are opting for a trusted institution that understands the importance of making homeownership a seamless and rewarding experience.

Types of Home Loan Interest Rates

An HDFC Bank Home Loan customer can choose between two types of interest rate options while availing a home loan. These are as follows:

Adjustable Rate Home Loan (ARHL): An Adjustable Rate Home Loan is also known as a floating or a variable rate loan. The interest rate in an ARHL is linked to HDFC Bank’s External Benchmark Lending Rate i.e. Policy Repo Rate. Any movement in Policy Repo Rate may effectuate a change in the applicable interest rates.

TruFixed Loan: In a TruFixed loan, the home loan interest rate remains fixed for a specified time period (for eg., for the first 2 or 3 years of the loan tenure) after which it automatically converts to an Adjustable Rate Home Loan with the then applicable interest rates. HDFC Bank currently offers a TruFixed loan where the interest rate is fixed for the first two years of the loan tenure.

Factors affects Home Loan Interest Rates

The interest rates on home loans are influenced by a variety of factors in addition to the base rate. Here are some key considerations:

Credit score: Your credit score plays a crucial role in determining the rate of interest on home loan. A higher credit score often results in a more favorable rate, as it reflects your creditworthiness.
 

Loan amount: The amount you borrow can impact the interest rate. Generally, lower loan-to-value ratios may attract more competitive rates.

Type of interest rate: Whether you choose a fixed or floating interest rate can influence your home loan rate. Fixed rates provide stability, while floating rates may vary based on market conditions.

Income and employment stability: Lenders often consider your income and employment history. Stable income and employment can positively influence the interest rate offered.

Market conditions: Home loan interest rates are also influenced by broader macro economic factors and market conditions. Changes in the economic landscape can impact rates.

Different Methods for Calculating Interest Rate Payments
 

The calculation of interest rate payments can be approached through various methods, each impacting how much you pay over the life of a loan. Here are different methods for calculating interest rate payments:

Simple interest method:

This method calculates interest based solely on the principal amount and the rate of interest. It's a straightforward calculation and is often used for short-term loans.

Compound interest method:

Compound interest considers not only the principal amount and the rate of interest but also the interest accumulated over previous periods. It leads to the growth of interest on interest, making it a common method for long-term loans.

Fixed interest rate:

With a fixed interest rate, the rate remains constant throughout the loan term. Monthly payments are predictable, providing stability for budgeting. It is a common method for traditional home loans.

Floating or adjustable interest rate:

Unlike fixed rates, floating or adjustable rates can change periodically based on market conditions. While this may lead to fluctuations in payments, it can be advantageous when market interest rates decrease.

Annual Percentage Rate (APR):

The APR represents the total cost of borrowing, including interest and additional fees. It provides a comprehensive view of the loan's true cost and is useful for comparing loan offers from different lenders.