5 Best Banks For Home Loan In 2021

Most people tend to opt for a home loan when buying their dream abode for the simple reason that buying a house means having to invest a lot of liquid cash. Even though some people may have that kind of cash ready in the form of savings, it may not make sense to part ways with that kind of an amount, and hence, home loans are preferred.

If you are looking to opt for a home loan in order to buy your dream home, you may be wondering what are the Best Banks For Home Loan and which lender to pick from a pool of options available out there.

Bank Name Home Loan Interest Rate Processing Fee
State Bank of India 6.70% Minimum Rs. 10,000
HDFC Bank 6.75% 0.50% (Minimum @ Rs. 3,000 / Maximum @ Rs. 10,000)
Bank of Baroda 6.75% Minimum Rs. 7,500
ICICI Bank 6.70% 0.25% (Minimum @ Rs. 3,000 / Maximum @ Rs. 5,000)
Citi Bank 6.65% NIL

Indian Bank Offering The Lowest Interest Rates on Home Loan?

As it may be obvious by the table, as of May 5, 2021, Citi Bank and Kotak Bank are the two banks that offer the lowest interest rate of just 6.65% on home loans in India. It must be noted that if you are a salaried professional or a woman loan borrower buying a house of less than Rs. 30 lakhs, the rate of interest may be further lowered for you by the bank.

Are Home Loan Interest Rates Different for Government Employees?

Yes, the rate of interest charged on a home loan in India is lower for government employees as compared to salaried employees. It must be noted that in addition to government employees, the rate of interest charged for women borrowers is also typically lower in order to promote the idea of financial independence in Indian women.

How To Calculate My EMI On Home Loan?

One of the biggest and a rather understandable concern of each home loan borrower is “how much would be my EMI.” Since a home loan is a long-term commitment you are making to a bank, offering your very own house as collateral in exchange, it is very important to understand the kind of money you will be supposed to shell out each month.

Home loan interest and EMI can either be calculated via an EMI calculator that is easily available online on multiple websites or by using the standard EMI calculation formula as follows-

P x R x (1+R)^N]/[(1+R)^ (N-1)

(P – Principal amount; R- Rate of interest; N- Tenure)

Home Loan Interest Rates: Floating Rate Loans v/s Fixed Rate Loans

When opting for a home loan, it is also advised to educate yourself about the type of rates typically offered by banks in order to make the best decision for yourself.

Fixed Interest Rate v/s Floating Interest Rate


Fixed Interest Rate Floating Interest Rate
The interest rate on fixed interest rate home loans remains the same throughout the year The interest rate on floating rate home loans changes as the benchmark rates change
Not offered by all banks or HFCs and NBFCs Offered by all banks, HFCs as well as NBFc
Ideal for lenders with a fixed salary and those who need to budget their months in advance Since a floating interest rate loan means fluctuating EMI’s it may make it difficult for the borrower to budget the month


It is typically advised to opt for a fixed interest rate loan, especially if it is obvious that the rates are going to increase owing to a flourishing market. If the current market state seems to be in a lull or it is so predicted to be in the near future, a floating interest rate may then be opted for. 

How to Get A Home Loan On Lowest Rates In India?

If you are planning to take a home loan for yourself, please be prepared to find yourself confused between a huge range and options of lenders to pick from. It is typically difficult to find yourself a lender that offers a loan at the lowest interest rate. What could give you an edge, in the market to get yourself the lowest interest rate on a home loan, however, is how well you take care of certain elements. Here are some things you could ensure before applying for a home loan to get the lowest interest rate in India-

Maintain a good credit score: Typically banks offer cheap interest rates to home loan applicants with a good credit score as it essentially translates to a  borrower’s repayment ability. Better the score, quicker the loan processing, and cheaper the interest rate.

Apply for a joint home loan: A joint home loan is wherein two people apply for a loan together and the responsibility of repayment lies on both the involved parties. Just like a good credit score, a joint home loan applicant offers more credibility and helps banks believe in the repayment possibility.

Opt for home loan balance transfer: Opting for a home loan balance transfer helps transfer your home loan from a high rate lender to a low rate lender thereby making it possible even for home current loan borrowers to get a home loan at the lowest home loan rate.

Home loan down payment: A home loan down payment takes some long-term load off your shoulders because you’re essentially paying off a part of your loan at the beginning of the tenure itself. In addition, it also translates to borrower’s credibility and hence, may have banks offer a lower interest rate on the home loan.

Final Thoughts: What Factors Should I Consider Before Choosing A Bank For My Home Loan?

Now that we have established a fine list of the top 5 best banks for a home loan in 2021, let us also help you with the factors that one needs to consider when choosing a home loan lender. It must be noted that your ideal bank will be a bank that offers a fine balance of all of these elements.

1. Interest Rate

It is typically advised to look for a bank offering the lowest home interest rates because even a 0.5% difference in the interest on a home loan of lakhs, or even crores in some cases, can make a mighty difference over the years.

2. Processing Fees

Most banks charge a processing fee, usually a fixed amount or a percentage of the loan value. Either look for a bank that does not charge any processing fee or look for a bank with the lowest processing fee.

3. Legal Fees

A legal fee may or may not be charged in order to verify the property documents. Needless to say, a bank that does not charge a legal fee should always be preferred.

4. Pre-Closure Charges

A pre-closure charge is a charge levied by banks as a clause to not let you pre-close the loan. It binds you to pay an added charge in case you choose to pre-close the loan.

5. Loan-To-Value (LTV) Ratio

LTV indicates the proportion of the property value to that of the loan amount. Many Indian banks finance even as much as 75% to 90% of the property value.

6. Part-Payment Rules

Look for a bank that does not impose rigid rules on repayment of the loan or any clauses that limit the amount or the percentage of the loan that can be prepaid.

7. Insurance Cover

An insurance cover for the home loan. While taking an insurance cover is optional, your bank may try to impose it as a mandatory purchase and you need to beware of the same.


1. Will home loan rates go up in 2021?

So far, there has been no hike in home loan interest rates in 2021. In fact, SBI even restored the original interest rates of 6.95% on April 1, 2021. Given the prevailing lull in the market due to the pandemic, the chances of a hike in home loan interest rates are rather low.

2. Which bank is best for a housing loan?

If speaking in terms of the lowest home loan interest rate, Citibank or Kotak Mahindra bank may be your pick as they offer home loans at the lowest interest rate of just 6.65%. Citibank, in addition, does not even charge any processing fee at present.

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