For those who see home loan re-payment as a pain each month, ‘Maxgain Home Loan’, offered by the State Bank of India is a convenient way to save and reduce your interest burden. Simply by clubbing your liquid finances with the home loan account, you can reduce interest burden substantially.
To understand the difference between a normal home loan and a Maxgain home loan, let’s consider the case of Mr. Mehta;
Mr. Mehta recently took a Maxgain home loan from SBI. His outstanding principal is 25 lakhs at an interest rate of 10% for a term of 20 years.
Let’s see how having a Maxgain home loan benefits him in different situations;
Case 1:
Mr. Mehta recently received a sum of Rs. 10 lakhs. See how he can use this sum in the case of a Maxgain home loan and a normal home loan to bring his interest burden down;
Normal Home Loan:
He can deposit the entire sum of 10 lakhs in the home loan account and prepay his loan, reducing his loan amount to Rs. 15 lakhs. Subsequently reducing his interest burden, but leading to a loss of liquidity.
For making the deposit, he will have to go through a long procedure of filling a deposit form, paying a processing fee and will have to make at least 2 visits to the bank.
Maxgain Home Loan:
Here, he can park the sum of 10 lakhs in his home loan account, reducing the principal amount on which interest is payable to Rs. 15 lakhs.
This means that he will have to pay interest only on the difference of principal amount and the surplus 10 lakhs and not the original principal amount of 25 lakhs.
More over, he can withdraw this sum any time simply by en-cashing a cheque or using a debit card, maintaining liquidity of the deposit of 10 lakhs!
Maxgain loan Vs. Normal loan
Case 2:
Mr. Mehta urgently needs Rs. 3 lakhs. Let us see the course of action in the case of a normal home loan and a Maxgain home loan;
Normal Home loan:
He will have to apply for a top up loan and will have to wait to get approval from the bank. This can take a few days. He may have to pay a processing fee too, depending on the bank.
Maxgain Home Loan:
Here, he can simply walk into any branch of SBI and encash a cheque of Rs. 3 lakhs from his Maxgain account!
Maxgain loan Vs. Normal loan
So a Maxgain account not only allows you to utilize your liquid savings to reduce interest burden on home loan, but also enables you to use your home loan account like any other savings account.
Here are a few tips to help you maximize your savings in Maxgain home loan;
1. Start using this account as the primary money parking account for all your liquid finances.
2. Route all your transactions through maxgain account (payment of utility bills, online shopping, credit card payments), If possible.
3. You can make use of net banking to schedule a transfer of the EMI amount to the saving bank account, a few days prior to the date of payment. So not only can you park your surplus funds, but also park the EMI payments in the OD account to maximize savings on interest.
4. You can also avail ATM card facility on the OD account or link it to an existing SBI savings account to avail the same.
5. However, any transaction made through a maxgain ATM card from another banks’ ATM will be charged a transaction fee, since it is an over draft account and not a savings account.
Here are a few frequently asked questions by our customers, which will give you a better understanding of Maxgain home loan:
1. Does the SBI charge a higher interest rate on Maxgain loans?
No, at present the interest rate charged on a Maxgain home loan is the same as the interest rate on a normal loan.
2. Does the SBI charge a higher processing fee for Max Gain?
At present, there is no difference in processing fee between Maxgain loans and term loans offered by SBI.
3. Is it mandatory to purchase property or life insurances while taking Maxgain loan?
Yes, it is advisable to have property insurance while taking a home loan. But it is not mandatory to purchase one from any sister concerns of SBI.
4. Can I claim section 80C principal repayment benefit for the surplus amount parked in Maxgain?
Unfortunately, Maxgain does not offer any tax benefit on the parked surplus amount in your OD account, since it is not an actual repayment of loan.
5. Can I enroll my MF SIPs in Maxgain?
Yes, you can. But make sure that there is surplus available balance else you’re ECS or SIP mandate will bounce.
6. If my loan amount is Rs. 30 lakhs and my parked surplus amount is also Rs. 30 lakhs, does it mean that my loan is closed & I can claim my property papers from SBI?
No, your loan is not closed as you have deposited the surplus amount on the OD account. This means that only your interest outgo will become zero and you will still have to pay the principal component of the EMI.
If you want to close your loan, inform the SBI in written. Then they will adjust your parked surplus amount towards the outstanding loan amount and your loan will stand closed.
7. I have taken a Maxgain home loan for an under-construction property. Can I park surplus amount to save on interest outgo?
Yes, you can park your surplus funds, but since your property is in the ‘under-construction’ phase, you will not be able to withdraw your funds during this period.
8. Can I transfer my home loan to Maxgain home loan?
Yes, you can. Get in touch with us
Make use of the calculator below to see how much you can save by transferring your home loan to SBI’s Maxgain home loan.
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