You will probably know that a leased property won’t provide stability and security like an owned property. Possessing a home of your own might probably be one of the most valued objectives of your life.
If you are planning to purchase your dream home and become a homeowner, you can easily obtain a house loan. The top lenders of India provide a highly affordable home loan interest rate that will help you fulfill your ambition.
This article will give you informative insights into the interest rates on home loans. Please stick to the end of the article to know more. Let’s dive in!
Calculating Rate of Interest on Home Loan
Home loans are usually long-term loans, and they come with a long repayment tenure. Thus, it is imperative to determine and figure out the overall interest liability towards your opted home loan.
If you are wondering how to calculate the home loan interest rate, then we will unveil two unique calculating methods:
- EMI Calculation Formula
You can use the following formula to calculate your EMI for your home loan:
EMI = [P x r x (1+r)^n]/[(1+r)^n-1]
Here, P is the principal, r is the interest rate, and n is the loan tenure in months.
- EMI Calculator
Alternatively, you can easily calculate the interest amount that is applicable to your home loan with the online EMI calculator. All you need to do is fill up all the requisite fields on the calculator, along with loan amount, repayment tenure, and interest rate.
Once you have fed all the requisite details, you need to click on the ‘Calculate’ option. This will provide you with a detailed breakup of your loan amount. It will also include the amount payable towards interest.
How Can You Calculate the Effective Interest Rate?
You should note that the applicable home loan interest rate comprises two distinctive components. They include:
This component of a minimal percentage is efficiently added to the base rate. It will enable you to arrive at the Effective interest rate for a particular kind of home loan. However, it significantly differs from one variant to another.
- Base Rate
It is nothing but the standard landing rate of the bank that remains applicable for all retail loans. This rate is basically subject to frequent changes based on multiple inputs.
You will need to pay the combination of the two on loan.
What are the Types of Interest Rates on Home Loans?
Usually, most home loan providers incorporate two significant types of home loan interest rate. They include:
- Fixed Interest Rate
Here, the interest rate remains even throughout the entire tenure of the home loan. Please note that there will be no modifications in the interest rates as it remains fixed. As per the offerings, you can also switch to the floating rates after completing a certain duration of the loan tenure.
- Floating Interest Rate
Here, the home loan interest rate charges are subject to the current lending rates of most banks. In fact, the interest rate remains linked to the latest published rate of the bank. However, this depends on several factors like lending rate revisions and monetary policy of RBI, the bank’s response to the revision, etc.
It is immensely crucial to choose a loan amount that suits your expenditure patterns best. So you should always pick out the right EMI and payback duration that works best with your requirements.
You can log on to the website of Bank of Baroda and check out their offerings on home loans. As their home loan interest rate is on the lower end of the spectrum, you can opt for a home loan now!