Interest rates charged by housing finance companies vary depending upon your individual status either resident or non-resident in India, the loan amount, scheme type, and are sometimes even based on the tenure of the loan.

Interest rates are different from institution to institution and generally range from about 12.5% to 16%. The interest on home loans in India is usually calculated either on monthly reducing or yearly reducing balance. In some cases, daily reducing system is also adopted.

Daily Reducing
In this system, the principal for which you pay interest, reduces from the day you pay your EMI. EMI in the daily reducing system is less than the monthly reducing system.

Monthly Reducing
In this system, the principal on which you pay interest reduces every month as you pay your EMI.

Annual Reducing
In this system the principal is reduced at the end of the year, thus you continue to pay interest on a certain portion of the principal, which you have actually paid back to the lender. This means the EMI for the monthly reducing system is effectively lesser than the second system of calculating interest.

Fixed rate of interest
Some institutions have a fixed rate of interest, which means the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit, even if rates of interest drop in the market.

Floating rate of interest
This is the rate of interest that fluctuates according to the market-lending rate. This means you stand the risk of paying more than you budgeted for in case the lending rate goes up.

Interest Rates (Indicative)