With real estate prices picking up after a lull of one year, most lenders are concentrating on the home loan segment. ICICI has just intensified the competition by offering a combination of fixed and floating rate. This comes at a time when most banks are speculating an interest rate hike. With a number of options available with the lenders, how do you identify the best option?

Which is the cheapest option?

One should not decide on a home loan by merely considering the interest rate. Kotak offers different rates- for salaried customers the rates are between 7.99 percent and 8.25 percent while for businessmen it is 8.5 percent. In addition to this, it charges a processing fee which is 0.25 percent or Rs. 10,000, whichever is higher, for salaried customers and 0.5 percent for businessmen.

These schemes are very similar to each other and the difference in weighted average is very less - in the range of 0.25 percent to 0.3 percent. Consider a Rs. 30-lakh home loan offered by HDFC and ICICI bank for 20 years, the equated monthly installment (EMI) works out to be around Rs. 25,562 for the first two years. On the other hand, in SBI Easy Loan, an individual would have to pay Rs. 25,093 for the first year and Rs. 26,035 for the next two years. The difference between the two schemes is marginal.