The interest rate on a Home Loan is the percentage charged on the principal amount borrowed, representing the cost of borrowing. This rate affects the EMI (Equated Monthly Instalment), with higher rates leading to higher EMIs. The interest rate is an important factor in determining the overall cost of the loan.
Bajaj Housing Finance offers Home Loans starting from 7.45%* p.a. to eligible salaried applicants. You can use our Home Loan EMI Calculator to estimate your EMIs and the total cost of borrowing.
The important thing to note about the interest rate for a Home Loan is that it is compounded interest and not simple interest. In other words, you do not pay interest only on the principal amount, but you pay interest on the principal amount plus the interest accrued. The housing loan interest rate determines your EMI amount and the total cost of borrowing.
When exploring home financing, one of the most important decisions is choosing the type of interest rate. Broadly, there are two options—fixed interest rate and floating interest rate. A floating interest rate changes over time depending on market conditions and benchmark rates such as the Repo Rate. If rates fall, your payable interest reduces, making EMIs lighter.
A fixed interest rate, on the other hand, remains unchanged for a specified period or until a reset date. This means your EMI stays constant during that time, regardless of fluctuations in the market. The biggest benefit here is predictability—you know exactly how much you will be paying every month, which makes financial planning simpler.
Ultimately, choosing between fixed and floating interest rates depends on your financial outlook. If you value stability and prefer consistent EMIs, fixed rates may be the right fit. If you’re comfortable with some fluctuation and want the potential to save when rates fall, floating rates could serve you better.
You can calculate the total interest amount payable with the following formula:
EMI = P x R x (1+R)^N / [(1+R)^N-1]
Where,
P is the principal loan amount
N is loan tenure in months
R id the monthly interest rate
The rate of interest (R) is calculated per month:
R = Annual rate of interest/12/100
If the rate of interest is 8.5% p.a., then:
R = 8.5/12/100 = 0.00708
For example, if you avail of Rs.15,00,000 at an annual interest rate of 8.5% for a tenure of 180 months (15 years), then your EMI will be calculated as follows:
EMI = 15,00,000 x 0.00708 x (1+0.00708)^180 / [(1+0.00708)^180-1] = Rs.14,771
The total payable amount will be:
Rs.14,771 x 180 = Rs.26,58,797
The principal amount is Rs.15,00,000 and the total payable amount is Rs.26,58,797. That means the total interest payable is:
Rs.26,58,797 - Rs.15,00,000 = Rs.11,58,797
Online Home Loan Interest Calculation:
With the easy availability of online tools such as the housing loan EMI calculator, your interest calculations can be made simpler. Here is how:
- Enter the required loan amount.
- Enter or select the tenure.
- Enter the applicable rate of interest rate.
The calculator then displays the EMI amount, total payable amount, and the total interest payable along with the principal and interest break-up. Through these calculations, you will be able to realistically assess the feasibility of the loan.
Here is a ready table for your reference:
| Home Loan Amount (Principal Amount) | Tenure | Interest Rate | Home Loan EMI | Total Interest Payable | Total Repayment Amount (Principal + Interest) |
|---|---|---|---|---|---|
| Rs. 2,00,00,000 | 20 years | 7.45%* | Rs. 1,60,508 | Rs. 1,85,21,854 | Rs. 3,85,21,854 |
| Rs. 3,00,00,000 | 20 years | 7.45%* | Rs. 2,40,762 | Rs. 2,77,82,782 | Rs. 5,77,82,782 |
The factors that affect your Home Loan interest rate are:
Credit Score
When evaluating a Home Loan application, your credit score determines your creditworthiness and ability to repay the loan. Payment history, outstanding debts, and general financial behaviour are some of the factors that are used to calculate your credit score. In addition to increasing your chances of approval, a high score could help you get a more favourable interest rate.
Employment
Another important factor in determining the Home Loan interest rate is your employment profile, which includes your occupation type, income, and stability.
Market Conditions
Interest rates on Home Loans are also influenced by the economic conditions. While economic stability frequently leads to stable or even more favourable rates, periods of inflation or economic uncertainty may cause rates to rise.
Before you complete your Home Loan application process, there are some tips you can employ to increase your chances of securing a competitive interest rate.
- Improve your Credit Score
- Borrow a loan amount that you can repay comfortably
- Apply with a financial co-applicant to increase your loan eligibility
*Terms and conditions apply.
Read Also: Tips to Reduce Your Home Loan Interest Rate
Frequently Asked Questions
Low interest rates allow people to borrow from lenders with more comfort. This significantly boosts the supply of funds in the economy and the demand. Eventually, prices of commodities rise and cause inflation. To balance this out, RBI increases the interest rates to curb the fund supply. A high inflation rate tends to increase the interest rates on Home Loans, consequently increasing the EMI. Hence, interest rate and inflation are inversely related. Inflation plays a significant role in the interest rate of Home Loans.
A down payment is the amount a borrower pays upfront while buying a property and is typically sourced from their personal finances or savings, and not a Home Loan. A large down payment potentially reduces the amount you owe to the lender, the interest rate, and EMIs. The borrower’s ability to put down a sizeable down payment offers lenders a sense of security. A larger down payment can position you as a less risky borrower. It also decreases the loan amount, which eventually reduces the interest rate. Hence, if you can afford a large down payment, it can help you in the long term by lowering the interest rate component.
Your credit score is a number ranging from 300 to 900, which is an indicator of your creditworthiness. The higher your credit score, the better your chances of securing a loan with beneficial terms. One’s credit score is based on their credit history, number of open accounts, dues, defaulted payments, debt, etc. All these factors make up your credit score and can significantly impact your financial standing. A good credit score can help reduce your interest rate.
The interest rate on Home Loans can be calculated using the formula: Interest = Principal x Rate x Tenure/100, or you can simply use the Bajaj Housing Finance EMI Home Loan Calculator to get the interest amount.
Calculating your EMI in advance can help you plan your loan repayment. This way you will be able to budget wisely and choose a property that fits your financial profile comfortably.
A Home Loan calculator is an online tool that helps you determine your EMI amount, total repayment amount, and interest payable.
You can calculate your EMIs using our Home Loan EMI Calculator. Here is how you can use it:
-
Enter the loan amount you wish to avail of.
-
Select the tenor.
-
Enter the interest rate.
The calculator will instantly display your EMI, total repayment amount, and interest payable.
Using a Home Loan EMI Calculator can:
- Helps you plan finances effectively by giving a clear estimate of your monthly EMI and total loan cost
- Allows easy loan comparison so you can evaluate different loan amounts, interest rates, and tenors.
- Estimates an optimum loan amount based on your repayment capacity, ensuring a manageable financial commitment
