Every lender advertises a rate 'starting from' some figure. Almost nobody gets it. The advertised rate is the price for the strongest possible borrower — high credit score, salaried at a listed company, borrowing a modest amount against a ready property. Everyone else pays that plus a margin, and the margin is where the real negotiation happens.
How the rate is built
Since 2019 most floating-rate home loans in India are linked to an external benchmark, usually the RBI's repo rate. Your rate is that benchmark plus a spread the lender sets for you.
- The repo rate is set by the RBI and moves for everyone at once. When it falls, floating-rate loans reprice down — usually within three months.
- The spread is the lender's margin, fixed for you at sanction. It reflects your credit score, income type, loan amount and the property.
- Your rate is the sum of the two. You cannot argue with the repo rate. The spread is the part that is negotiable, and the part a broker works on.
What pushes your spread up or down
| Factor | Effect on your rate | Can you change it? |
|---|---|---|
| Credit score above 750 | Lowest available spread | Yes — over three to six months |
| Credit score 700–750 | Typically 0.10%–0.50% higher | Yes |
| Self-employed income | Usually higher than salaried | No, but presentation matters |
| Loan above ₹75 lakh | Often a higher slab | Sometimes, by borrowing slightly less |
| Loan-to-value above 80% | Higher spread | Yes — larger down payment |
| Under-construction property | Higher until completion | No |
| Woman as primary applicant | Small concession at many lenders | Sometimes |
Fixed or floating?
Almost all home loans in India are taken on floating rates, and for most people that remains right. Floating rates are lower to start, they fall when the repo rate falls, and — importantly — the RBI bars lenders from charging foreclosure or prepayment penalties on floating-rate home loans to individual borrowers. A fixed-rate loan removes that protection and usually costs more from day one.
Fixed rates make sense in a narrow case: you are close to the edge of what you can afford, and a rise of one or two percent would genuinely hurt. Certainty has a price, and that is what you are buying.
Four ways to pay less
- Fix your credit score before you apply, not after you are refused. A file that has already been rejected is harder to place.
- Put down more. Crossing below 80% loan-to-value moves you into a better slab at most lenders.
- Compare properly. The gap between the cheapest and dearest lender for the same profile is routinely half a percent.
- If you already have a loan, ask your lender to reprice it. It is free, they sometimes say yes, and a transfer is the fallback if they do not.
See what your EMI would be at different rates, and what half a percent is worth over your tenure.
Open the EMI calculator