Jun 27, 2013 03:07 PM
10876 Views
(Updated Jun 28, 2013 09:00 AM)
I had a tough time understanding Home Loan to start with. All I knew was that a bank was ready to lend me money based on my income and it would take 10-20 years to clear the loan off and own a home on MY name. But the good news is, no you don't have to wait so long. At least with SBI Max Gain Home Loan Product.
What is SBI Max Gain?
This a product by SBI Bank which lets providing home loan with these features:
Provides Home Loan as an OD account.
Reduce monthly interest out-go's
Maximum liquidity of funds
Earn interest on surplus parked amount
Flexibility of operating Home Loan account as Savings/ Current account
How does this work?
SBI opens an OD for you where in the credit limit is same as the loan amount sanctioned. An OD account is similar to a savings account but based on security, like property, FD's, Policies and such. Based on this assurance/ market value of these securities bank allots a credit limit to this account. And the amount can go from positive to zero to negative. When you withdraw money from this account it goes from zero to negative and when you pay vice-versa. So in case of home loan, the house you purchased is the security. And the loan amount is the credit limit.
In a savings account the interest is paid by bank to you for the amount you put in the account, in OD its the other way. You pay interest to the bank for the amount you withdraw.
With SBI Max Gain, if you park more money in this OD, the bank will pay you the interest for the additional money you parked apart from Monthly EMI.
So, your monthly interest comes down by the amount of interest bank owes you on the surplus funds parked.
Suppose you took a loan of 20 lakhs at an interest rate of 10% for 180 months. Your monthly EMI calculates to ~21500.
Total Loan Amount = 20,00,000
Tenure = 15 * 12 = 180 months
Interest Rate = 10%
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Monthly Interest = (Total Loan Amount * Interest Rate ) / 12 = ( 2000000 * 0.10 ) /12 = 16666.66
Monthly EMI = 21492 ( Calculated using Excel PMT function or use SBI EMI calculator)
Monthly credit to Prinicipal = Monthly EMI - Monthly Interest = 21492 - 16666.66 = 4825.33
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And say you parked 2 lakhs in the OD account. SBI Max Gain treats this amount as repayment of loan and so now the outstanding loan amount is treated as,
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Outstanding Amount = ( Total Loan Amount - Parked Surplus Amount ) - ( Principal payed in the previous month) = 2000000 - 200000 - 4825.33 = 1795175
Interest for the current Month = ( Outstanding Amount * Interest Rate ) / 12 = (1795175 * 0.10 ) /12 = 14959.79
Current Month credit to Principal = Monthly EMI - Current Month Interest = 21492 - 14959.79 = 6532.20
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If you see, credit towards principal for the current month is increased by 1706.87. This way you can clear off the loan faster.
Also, SBI calculates interest on a daily basis. The amount of interest the bank owes you on the surplus money parked is calculated daily and then summed up for a month. The same is deducted from the interest you owe to the bank on the total outstanding.
That's right, as compared to Home Loans provided by other banks, there are no charges for prepayments or withdrawals. Isn't it awesome?
