Festival home-loan offers: Prioritise long-term savings, avoid teaser rates

Compare the full cost of the loan rather than focusing solely on interest rates

With Navaratri — considered an auspicious time for buying property — having begun, banks and housing finance companies (HFCs) have rolled out special festival offers on home loans. Borrowers, however, should weigh these carefully before committing.

 

What’s on offer

 

Banks and HFCs have rolled out a range of festival offers. “These include reduced interest rates, discounted or waived processing fees, longer repayment tenures, and easy topup loan options,” said Ratan Chaudhary, head of home loans at Paisabazaar. Some lenders have also cut legal and valuation charges. While the schemes primarily target new borrowers, existing customers can also benefit through balance transfers.

 

What to prioritise

 

Borrowers should prioritise offers that translate into direct savings. “Focus on benefits that cut long-term costs, such as lower interest rates and waived processing fees,” says Atul Monga, chief executive officer (CEO) and cofounder of BASIC Home Loan.

 

Prioritise reduction in interest rate and a recurring benefit over a waiver in processing fee, which is a one-time gain.

 

Existing borrowers should refinance to a lower rate, but only if the drop is substantial. “Refinancing for a reduction of 10-20 basis points may not be worthwhile, even if processing fees are waived. Real benefits from refinancing typically occur when the reduction is around 50 basis points,” says Adhil Shetty, CEO, BankBazaar.com.

 

Avoid offers that bring benefits for a limited period. “Be cautious about offers with spreads valid only for a limited time, as rates may reset higher after one or two years,” says Shetty.

 

Monga suggests that add-ons like cashback, gift vouchers or free credit cards should be ignored, as these have a minimal impact. Chaudhary advises against going for offers that impose prepayment or foreclosure fees.

 

Other factors to weigh

 

Borrowers’ evaluation of offers must go beyond the headline interest rate. “Customers must evaluate all costs to arrive at the total cost of the loan. Processing fees, legal and documentation charges together can increase costs significantly and, hence, need to be evaluated,” says Shetty.

 

The loan-to-value ratio (LTV) affects both eligibility and pricing. A lower LTV of 60-65 per cent may bring down rates more compared to an LTV of 80 per cent.

 

Tenure matters too. A shorter tenure cuts total interest but raises monthly outgo.

 

Bundled insurance and its cost should also be scrutinised. The Reserve Bank of India (RBI) has clarified that banks cannot make it compulsory for buyers to purchase. A separate term policy covering the loan amount is preferable.

 

The catch

 

The best deals go to applicants with strong credit scores. “Applicants with a low score or damaged credit profile may not get the loan at the advertised rates,” says Chaudhary. He adds that lenders also consider factors like property type, value, location, income stability, and the ratio of equated monthly instalment (EMI) to net monthly income before offering the best rates.

 

Some schemes are limited to employees of select companies or government departments. Time restrictions also exist. “If disbursement does not happen within the set timeframe, the benefits are lost,” says Shetty.

 

Precautions for borrowers

 

Comparing multiple offers is essential. “Do exhaustive research and then select the one that best fits your budget and requirements,” says Chaudhary.

 

Avoid taking on excessive debt. “Assess debt-to-income ratio and repayment capacity to prevent future strain,” says Monga. Chaudhary also warns that fraudulent loan offers are rife, making it vital to stick to reputable lenders.

 

ON OFFER

 

From major players

 

HDFC Bank: Interest starting @ 7.40%

 

ICICI Bank: Special processing fee of ₹5,000 (plus taxes) for salaried

 

Axis Bank: Interest starting @ 7.40%

 

LIC Housing Finance: Interest starting @ 7.50%, zero processing fee

 

Bank of Baroda: Interest starting @ 7.45%, low processing charges, free credit card

 

Compiled by BankBazaar.com, data taken from websites of respective banks and HFCs (as on Sep 24, 2025).