How to clinch ideal home loan deal: 5 key factors to consider before applying | Mint

Many Indians dream of buying a new home, but getting a home loan to fulfil your dream is considered a significant financial commitment. That is why securing a home loan requires careful planning.

With fluctuating interest rates due to worrying global inflation and volatile oil prices, it becomes even more important to select a reputable lender after careful review. Keeping yourself updated on home loan interest rates, provisions, best lenders and easy repayment terms can help you make the right decision. Here, we discuss in detail five essential facts you should know and consider before applying for a home loan in India.

Interest rates can fluctuate

To put it simply, home loan interest rates in India generally range between 8.35 per cent and 13.75 per cent per annum. For example, HDFC Bank offers home loans at an interest rate of 8.75 per cent to 9.95 per cent per annum, whereas SBI offers home loans starting from 9.15 per cent per annum.

The interest rates applicable to a person depend on numerous factors such as their credit profile, credit score, repayment capacity, past history and respective lender’s policies.

To foster lower EMIs on home loans, the Reserve Bank of India (RBI) has recently reduced repo rates. However, the future course of action of the central bank remains uncertain due to global macroeconomic challenges. Borrowers, on their own part, should be careful and consider fixed or floating interest rate options based on their financial capacity and repayment comfort.

Note: The interest rates discussed above are indicative in nature. For the most recent home loan interest rates applicable consider reaching out to your respective financial institution.

Tax-related benefits can bring costs down

Home loan borrowers can claim deductions under Section 24b of the Income Tax Act. As of April 2025, this section permits a ₹2 lakh annual deduction on home loan interest rates for self-occupied properties. There is no such limit for let-out properties.

The new tax regime removes this benefit for self-occupied houses. That is why borrowers should consider reaching out to a certified tax and financial planner to clearly understand, learn about,and compare regimes to maximise tax savings.

Credit scores can impact home loan approvals

This is a pretty straightforward point to keep in mind. A strong credit score, generally any figure above 750, significantly improves and boosts your chances of securing a home loan at easier interest rates.

Lenders primarily check and analyse your honesty in repayment and creditworthiness based on your past credit history, total outstanding loans, credit card bills and overall financial condition. That is why regularly checking your credit score and maintaining discipline in financial goals can cumulatively boost your credit profile and foster easier loan eligibility.

Home loan amount is determined by loan-to-value ratio (LTV)

Leading Indian financial institutions offer home loans covering up to 90 per cent of the property’s value, with the remaining 10 to 25 per cent required to be paid as a down payment. Now, a lower LTV ratio often results in better and much more lenient interest rates, whereas a higher down payment can bring down long-term loan costs.

Market trends influence loan affordability

Home loan interest rates depend on factors such as the location of the property, MCLR rates, type of property, and prevailing economic conditions. The RBI closely monitors economic conditions, and the policies adopted by the central bank can directly impact home loan rates.

With global inflation concerns and the threat of US President Donald Trump’s reciprocal tariffs, lenders continue to adjust their home loan offerings. Staying updated on evolving market trends and lender-specific promotions can help you secure the best possible home loan terms.

It may be noted that going for a home loan is a long-term financial commitment and comes with serious responsibilities. It requires careful consideration and planning. By understanding interest rate trends, tax benefits, credit score implications and loan eligibility criteria, you can make an informed decision and ensure a smoother home loan availing experience.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult a qualified financial expert before making any home loan decisions.