Best Banks For Home Loan Borrowers

In India, saving and investing money is the option which everyone looks for. Investing money in buying a home is in everyone’s to do list. So no wonder that they go for a detailed analysis about the home loan and the process involved in it to choose the best, the fastest and the safest home loan provider.

                            According to the recent analysis, here are the details of the best banks for home loan borrowers.

  1. SBI  Home Loan capturing 25.5% market share.
  2. HDFC Ltd. with 24.13%
  3. LIC Housing with 15.83%
  4. ICICI Bank with 13.10%
  5. Axis Bank with 6.23%
  6. IDBI Home Loan with 4.67%
  7. PNB Home Loan with 4.22%
  8. Others with 6.32%

These are the points usually borrowers look at while applying for a home loan.

  • Interest rate – Fixed, floating, hybrid
  • Home loan processing speed and the fees involved.
  • Loan qualification
  • Repayment terms

Let us go deep into these topics.

  • Interest rate :

                         

Interest rate offered is the primary factor of comparison. It affects the EMI and total amount payable. For a home loan, it is advised to go for a loan with low interest rates. Also it is recommended to decide whether to go for a fixed or flexible or hybrid loan rate.

Interest rates of various banks are as follows :

  1. SBI                          –             9.50% – 9.75%

  2. HDFC Ltd.             –            9.50% – 9.75%

  3. LIC Housing          –           9.6% – 9.75%

  4. ICICI Bank             –           9.50% – 9.75%

  5. AXIS Bank              –          9.50% – 9.75%

  6. IDBI Bank               –          9.60% – 9.75%

  7. PNB                          –          9.60% – 9.75%


Here is the graph showing the trends of Home loan base interest rate over the five years :

best banks for home loan

  • Home Loan processing speed and the fees involved :

                            

It is a bit difficult process to apply for the home loan. You have to submit a large set of income and property related documents. The timeline for the approval will differ from bank to bank. Some banks are comparatively slower than others in carrying out the procedures, while some banks will approve your loan in simple and less time-consuming way. 

                            You can choose your bank as per your convenience. If you can spend enough time to carry out the procedural work, then you can apply for the slower banks. 

Here is the list of some major banks processing fees :

Bank Processing Fees
ICICI Bank 0.50%  of the loan amount or Rs. 1500/- (Rs. 2000/- for Mumbai, Delhi & Bangalore), whichever is higher + applicable Service Tax & Surcharge
HDFC Ltd 0.5% or 10,000+service tax (12.36%), whichever is higher
SBI Home Loan Upto 1cr- NIL 
Axis Bank Up-to 0.50% of the loan amount subject to minimum of Rs.10,000/-
LIC Housing 0.50% of the loan amount
IDBI Home Loan Upto 0.50%
PNB Home Loans 0.50% of the loan amount
  • Loan Qualification :

                            Each bank, internally, has its own rules to grant the loan.  The different aspects usually lenders look into are the age, the source of income, credit history, employment stability, etc. Hence, each individual chooses the lender according to one’s own preferences.

  • Repayment terms : 

                            Housing finance regulator, National Housing Bank (NHB), has already barred home finance companies from charging any prepayment penalty. Among banks, State Bank of India was the  first to do away with the pre payment fee on both fixed and floating rate loans. Following this, nearly 20 banks withdrew the penalty on floating rate loans. however, most lenders continue to charge the penalty on premature closure of fixed rate loans. Hence, it is another aspect a borrower looks at while taking a loan.

                            Different lenders use different yardsticks for measuring the borrower’s eligibility. Why shouldn’t borrowers consider doing research and compare several competitive feature of home loans offered by different lenders? It is better to have the policies, facts, terms and conditions clarified well in advance before locking in a seemingly ideal home loan with any lender.

How Banks evaluate loan eligibility using Risk Rating Parameters.


All home loan applications are subject to Risk Rating Parameters & Model Table. Total maximum marks a person can get is 168 and the cutoff is set at 96. 

Risk rating parametersThe details of the various ‘Rating Parameters and Risk Rating Model’ are given here. Most of the Banks in India, take the decision, whether the borrower is loan eligible or not, based on number of points the borrower gets  from the below table.

‘Rating Parameters and Risk Rating Model  Table’

Sr.

No.

Variable Score Max Min
1 Borrower Age (in Year)

(a)0–8

(b)Above 18–upto 25

(c)Above 25–upto 40

(d)Above 40–upto 50

(e)More than 50


0
1
4
5
0
5 0
2 Education Qualifications

(a)Doctorate/Post Graduate

(b)Graduate

(c)Diploma

(d)Higher Secondary

(e)Less than Higher Secondar


5
3
2
1
0
5 0
3 Marital Status

(a)Married

(b)Single


12
3
12 3
4 Mobility of Individual-Location

(a)Has not changed location in past 3 years

(b)Changed location once in past 3 years

(c)Changed location more than once in past 3 years


10
3
0
10 0
5 Number of dependents

(a)Zero

(b)One

(c)Two

(d)More than two


8
5
2
0
8 0
6 Number of join applicants

(a)0

(b)1

(c)2 or more


0
5
9
9 0
7 Relationship with bank

(a)All banking done through bank

(b)Good track record of banking with bank

(c)Short term relationship

(d)No existing relationship


14
12
3
-4
14 -4
8 Employer type

(a)Govt./Public sector

(b)MNC

(c)Listed private sector companies

(d)Professional

(e)Unlisted private companies

(f)Own business

(g)Self Employed

(h)Pensioner drawing pension through Bank of Baroda

(i)Pensioner drawing pension from others

(j)Others


9
9
9
4
8
2
2
0
0
0
9 0
9 Designation

(a)Senior Management

(b)Middle Management or Self employed

(c)Junior/Clerical/Pensioner


5
3
0
5 0
10 Stability of Income

(a)Income has been steadily increasing over the last 3

years

(b)Income has been almost the same over the last 3

years

(c)Income has beenunstable over the last 3 years

(d)Income has been steadily decreasing over the last 3years


12
7

0
-5

12 -5
11 Proof of Income of borrower

(a)Income tax returns

(b)Salary slip

(c)Letterhead

(d)No proof


3
3
1
0
3 0
12 Marketability of property (Marketability will increase if

significant developments are happening in nearby areas,also it will depend on the condition of the property etc.)

(a)Very good

(b)Good

(c)Fair

(d)Poor

 

15
10
5
-8

15 -8
13 Housing loan purpose category

(a)Construction (New)

(b)Purchase (Old construction)

(c)Improvement

(d)Foreclosure (for borrowers who borrow in order to

repay a previous housing loan)

(e)Loan given under the rural housing scheme


4
0
8
8
2
8 0
14 Loan to value ratio

(a)Less than 0.5

(b)0.5–0.7

(c)Above 0.7–upto 0.9

(d)More than 0.9


18
12
7
0
18
0
15 Net worth to loan ratio

(a)0–0.5

(b)Above 0.5–upto 0.75

(c)Above 0.75–upto 1.0

(d)Above 1.0–upto 1.5

(e)Above 1.5–upto 2.5

(f)More than 2.5


0
1
2
3
4
5
5 0
16 Net annual income of the borrower (in)

(a)Lessthan 1,00,000

(b)1,00,000–2,00,000

(c)Above 2.00,000-upto 3,50,000

(d)Above 3,50,000–upto 6,00,000

(e)More than 6,00,000


-5
2
4
6
10
10 -5
17 Fixed obligations to income ratio

(a)0-0.3

(b)Above 0.3–upto 0.5

(c)Above 0.5–upto 0.7

(d)More than 0.7


12
8
4
0
12 0
18 Guarantor’s net worth to loan ratio

(a)0–0.5

(b)Above 0.5–upto 1

(c)More than 1


-4
4
8
8 -4
Sum 168 -23


So, 


Did you calculate your Risk Rating Points?


Where do you stand?