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Fixed Interest Rate Home Loans Explained: Interest Rates and Benefits

Fixed Interest Rate on Home Loans


6 mins reading

Last updated on 12th April 2024

Are you planning to apply for a house loan soon? Then, you should be aware of both fixed-rate home loans and variable-rate home loans. Both types of loans have their pros and cons, as their names suggest. An individual can choose from one of these loan types depending on how he or she plans to repay the loan. In case, you plan to go for the home loan fixed interest rates option, you should have a good understanding of it, especially its benefits.

Table of Contents

Home Loan on Fixed Interest Rates

An obvious benefit of a fixed-interest home loan is that the interest rate remains the same during the entire loan term or as long as the lender permits. Interest rates do not fluctuate as they do with variable interest rates. Let’s take an example and understand this. If tomorrow you decide on taking a home loan of ₹50 lakh from a bank or financial institution with a fixed interest rate of 9% for a period of 30 years, then your Equated Monthly Installment (EMI) will be ₹40,231. This will remain constant for the entire 30 years.

Banks Offering Fixed Home Loan Interest Rates

Some of the best fixed-rate home loans in India are offered by HSBC Bank, HDFC Bank, and Axis Bank.

Bank Fixed Rate Processing Fee
HSBC Bank - 1% of the loan amount
HDFC 7.40% p.a. to 8.20% p.a. 0.5% of the loan amount
Axis 12% p.a. Up to 1% of the loan amount


Suggested read: Top Banks for Home Loans in India


Benefits of Fixed Rate Home Loan India

Ease in Repayment: As the interest rate on the loan amount is fixed for the entire loan period, it becomes easier for borrowers to plan their budget and pay the same monthly EMI for home loans.

  • Financial Security: Although it can seem conservative, many people prefer having greater control over their finances. The fixed interest rate option gives that stability. 
  • No change in Interest Rates: Unlike the variable or floating interest rates where the rate of interest is dependent upon market fluctuations and can at times destabilize a person’s financial planning, the housing loan fixed interest rate option guarantees no change in the rate of interest rate, whatsoever.
  • Current Interest Rate is low: In case, the current interest on home loans is low and is among the best 5-year fixed home loan rates ever, then it is better to opt for the fixed rate option since there are good chances of it getting higher in the future.

Fixed Interest Home Loans vs. floating Interest Home Loans

The fixed-rate home loans or fixed mortgage rates loans offer a fixed rate of interest on the loan amount for the tenure of the loan, as agreed upon by the lender and borrower. The change in rate will not occur for this period. However, it may change after fixed intervals, usually two to three years, depending on the clauses in the loan agreement. 

On the other hand, the floating interest rates fluctuate depending on the market conditions. A floating rate is attached to a base rate, so any change in the base rate affects the floating rate, which can either rise or fall. However, one of the highlights of the variable rate is that it is cheaper compared to fixed rates. So, even though the fixed rate remains stable throughout the loan tenure, the interest rate is kept higher by banks.

In India, the variable rates do not fluctuate consistently. This is because the Reserve Bank of India has instructed banks to keep their interest rates down. However, the catch is most banks offer lower interest rates to new customers and increase them later on, while their old customers continue paying the rate of interest set for them in the initial period and fail to enjoy the lower rates offered to new customers. Additionally, when the interest rates come down, the EMIs are kept the same, only the tenure of the loan is modified.

In the case of fixed-rate loans, there are certain terms and conditions like the Reset Clause, which is subject to revision. The clause is dependent on the decision taken by the bank, which comes into effect after the completion of the agreed fixed periods, and that might have an impact on the existing interest rate.

Suggested read: Home renovation loan options

Today, most borrowers are going for a combination of both fixed and variable interest rates while applying for a home loan, to get the benefits from both. Generally, in the first few years, the fixed rate of interest is opted and then, thereafter the variable rate is preferred.

FAQs on Fixed Interest Rate Home Loans

The fixed home loan interest rates are fixed interest rates on a home loan that do remain constant during the loan tenure.

No. The interest rates do not change every year.

Yes, you can change your home loan interest rate from floating to fixed, and vice versa by intimating the bank and paying the requisite fee, if any.

The reason for choosing a fixed-rate home loan is that you can easily plan your monthly and yearly budgets.

Generally, banks can reset their fixed interest rates, maybe every two to three years. This clause may be included in the loan agreements to that effect.

What is a Home Loan Calculator?

A home loan calculator is a powerful online tool that allows you to determine home loan eligibility based on various factors such as your credit score, interest rate, property type, loan duration, any existing EMI and down payment. It takes into account these variables and provides you with an approximate breakdown of what your monthly payments would be. By using a home loan calculator, you can quickly assess different scenarios and make informed decisions.

How to Use a Home Loan Calculator?

Step 1: Choose a reliable website

Start by researching online for a reputed home loan calculator website. Many financial advisory websites offer these tools for free. Choose a reliable one that provides accurate results.

Step 2: Enter your required loan amount

Determine the amount you plan to borrow from a lender. This figure should reflect your budget and the down payment you can afford. Input this amount into the calculator.

Step 3: Choose the loan term

The loan term refers to the number of years you plan to repay the mortgage. Common duration is 15, 20, or 30 years. Consider your financial goals and select a loan term that aligns with your plans. Put this term into the calculator.

Step 4: Enter your age and gender

The next step is to input your age and gender. Age plays a major factor in determining the loan amount as it helps in knowing the repayment years. Some websites may also ask gender and city.

Step 5: Confirm your occupation

The lender would also like to know your source of income; whether you are a salaried or self-employed professional, and what is the mode of payment.

Step 6: Mention your annual/monthly income

The next field to fill is your annual income after all PF, medical & tax deductions. In the case of a businessperson, the total take-home minus the expenses is considered as reliable income. If there is a co-applicant, mention his/her annual income too. Applying for a home loan with a co-applicant helps in enhancing your eligibility.

Step 7: Current monthly EMI/obligation

Some websites also ask for your ongoing payments every month & the loan amount differs based on that. Consider your regular bills, such as utilities, groceries, and debt payments including car loans, student loans, and credit card balances.

Step 8: Submit

Once you have entered all the necessary information, the calculator will give you an estimated loan amount offered by a number of reputed banks and housing finance companies. This figure will give you a clear picture of what you can afford. Take the time to review and analyze the results, considering different scenarios if needed.

Step 9: Refine your calculations

If the estimated monthly payment is too high or you believe that you can pay more, consider adjusting the loan amount, loan term, or down payment to find a more manageable payment. Use the calculator to experiment with different scenarios until you find the most suitable option.

Step 10: Consult a mortgage professional

While a home loan calculator can provide valuable insights, it's always a good idea to consult with a mortgage professional to discuss your options and ensure you have a complete understanding of the financial implications.

Buying a home is a significant financial commitment, and determining what you can afford is a crucial step in the process. A home loan calculator simplifies this task. By carefully evaluating the above factors, you can make an informed decision and choose a mortgage plan that aligns with your financial situation and goals. So, before you embark on your homebuying journey, take advantage of the valuable insights provided by a home loan calculator and ensure a more confident and stress-free decision-making process.


1: What should be the ideal rate of interest?

The ideal rate of interest varies from bank to bank and mainly depends on factors like type of property, customer’s credit score and occupation. It usually starts from 8.50% and can go up to 15% per annum in ideal scenarios.

2. Who can be a co-applicant in taking a home loan?

A co-applicant is any family member bound by marriage or blood including your spouse, father, son, unmarried daughter, and brother & sister (conditions apply). Distant relatives and friends cannot be a co-applicant.

3. Is it better to take a shorter loan term?

Longer the loan duration, more the interest amount you pay. So if you can repay quickly, you save upon the interest amount.

4. Which is the best bank for home loan in India?

There are several government-run and private banks along with government-approved housing finance companies that offer home loans at reasonable rates. You can check their home loan eligibility with various banks to crack the best deal.


Published on 28th July 2023