SBI Maxgain Home Loan Account – Helps You Earn Higher Interest

By Anil Gupta, 125  Finance

SBI maxgain home loan account helps you earn more interest on savings by setting off high loan interest outgo. NRI need Power of attorney for closing maxgain account.


I am writing this article to help people who are looking out to take home loan. What I am describing here is my own experience with SBI Maxgain home loan in last 3.5 years of its tenure.

I would start by saying that ‘SBI Maxgain Home Loan’ or for that matter a similar product from any other bank is one of the best option that you can choose while taking home loan. Please note that there is a substantial difference between the similar home loan products of government banks vs private banks. You should carefully understand the terms and conditions before signing any documents.

My case:

Complete Cost of Apartment35,20,000
Paid out of pocket15,20,000
Loan Applied For21,00,000
SBI Maxgain Home loan (Sanctioned amount) * – Generally lesser than what you apply for – so keep a buffer20,65,000
Maxgain OD account balance *-20,65,000
Rate of interest (Locked for first 3 years)8%,9%,9%, market rate afterwards
Rate of interest on market rate in 4th year11.75%

* values have been rounded off to nearest thousand for easier understanding

What is Maxgain Home Loan Account?

  1. It is an overdraft account that SBI (read any other bank that offers similar facility) opens up for the loan seeker.
  2. Once loan is sanctioned, the loan amount is immediately transferred to this overdraft account.
  3. Whenever you need to make a payment to the builder, the check is drawn by bank from this overdraft account in favor of the builder.
  4. You, as a loan seeker pay interest ONLY on the amount that has been drawn from this OD account at any given point of time. The total amount that shows up in the OD account is the one that has been sanctioned to you and is shown as negative balance. You DO NOT pay the interest on the complete balance in your OD account unless it has been disbursed.
sbi maxgain home loan account helps earn more interest than savings account if you plan carefuly

sbi maxgain home loan account helps earn more interest than savings account if you plan carefuly

Can you withdraw money from maxgain Home loan OD account?

Yes, but with a clause. SBI issues you the cheque book and internet banking for this OD account only when the home (property) has been registered.
This means that you won’t be able to withdraw the extra money that you park in this account if you home loan is for an under-construction property.
Mine was the same case and hence could never withdraw it as my home is still under construction at the time of writing this article.

Till the time property is registered, money can be withdrawn only to make payments to the builder as per the construction linked plan. You can only deposit the money in it by way of pre-paying some of full part of the loan though.

How can I earn higher interest in my SBI savings account with SBI Maxgain home loan account?

It is pretty simple. Whenever you have a surplus savings in your any savings account, you can simply transfer it to this home loan OD account.

The normal savings account earns interest in the range of about 4-6%. Transferring money in to this OD account will save you interest on your pending home loan which would be somewhere in the range of 8-12%.

For example, if you have 10,000 rupees extra sitting in your savings account. This would earn approximately INR 33.3 @4% P.A. for 1 month as interest.

If you transfer this amount to your Maxgain account, you would then GET INR 83.33 @10% P.A. for 1 month as interest.

A good difference of 83.33 – 33.33 = 50 rupees a month! That is why we say: “Money saved is money earned”

You would technically not receive this money from bank but this 83.33 would be the amount that you would NOT pay as interest on your home loan to bank for this particular month. Hence, your savings on the loan interest can be counted as your income.

To add more benefit, this interest is NOT even taxed!

Do we earn interest on Maxgain account if the book balance is in positive?

No. There is no interest paid out if the balance is positive.

Positive book balance in Maxgain OD account means that you have paid back the total loan amount to bank. There is nothing DUE from your side to bank.

If you have pre-paid the full loan i.e. much before the initial time line, it is better to close the account and get the EMIs stopped.

You have to go and get it done. SBI will NOT automatically stop the EMI deduction if your book balance turns positive by way of pre-paying.

How can the book balance in Maxgain OD account get positive? It should always be negative. isn’t it?

Yes. You are right. The balance in Maxgain home loan account will mostly be negative till the time you have not re-paid it completely back to bank.
So, there is a possibility that you have pre-paid your due balance earlier than the complete loan tenure.

For example, if I repay the complete amount within 4 years for a loan of 10 years and do NOT stop the EMI cycle, the bank would deduct the EMI and deposit it in my OD account. It would then start accumulating the positive balance.

How to close your Maxgain home loan account?

The only way to close the account is to re-pay the complete loan amount. The OD account is generally tagged to one of the SBI branch and this can be a completely different branch than the one sanctioned your home loan.

In my case, it was the Gurgaon’s Sushant lok SBI branch holding my OD account whereas the loan was sanctioned by SBI’s regional branch in Dundhera, Gurgaon.

How to close your Maxgain home loan account if you are NRI (NOT physically present in India)?

  1. If you are still in India and planning to leave soon, you would need a notarized Power of Attorney (registered POA is NOT required for bank matters) to help any of your friend or relative to close the home loan account on your behalf. You will have to write and get this POA notarized while you are still in India. Sample Power of attorney is available here.

    This POA can be notarized by any notary within India.

  2. If you are NRI i.e. not physically present in India, then the notarization (or attestation as commonly known) of power of attorney is done by Indian Embassy or consulate in your specific country.

Process of closing the Maxgain home loan OD account:

  1. Visit the branch (holding your OD account) in person . You can also send a person on your behalf holding your POA (Power of attorney). Carrying POA is important as they will keep a copy of the POA for records.
  2. Ask for the Maxgain home loan OD account closure form. You would also need to ask for the balance accrued interest to be paid till date for the account.
    The interest accrued till date means the date when you actually close the loan.
    For e.g. lets assume that your monthly interest is due on 1st of every month and bank debits it your account the same day.
    Now, if you are going for closure of your loan on 10th day of the month, the interest from current month’s 1st to 10th would not have been debited yet.

    So, while closing the loan on 10th, bank would calculate interest for 10 days + the current outstanding loan. This will the amount you will pay and pay-off completely.

  3. Pay the remaining balance in your account (+ the interest accrued till date) by SBI cheque or cash. Giving out SBI cheque is recommended as the clearing would happen immediately else, you may have to visit the branch 1-2 days later to allow for some other bank’s cheque clearance.
  4. Once account is paid out and closed, the branch will give you a letter specifying that the FULL amount has been paid and account has zero (0) balance. At this point the OD account would still show as an active account but with zero balance.
  5. Take this letter to the regional home loan branch of SBI (Like Dundahera Gurgaon branch in my example case) along with POA. They will verify the letter and finally close your OD account.

    Here, they will also STOP your monthly EMI’s deduction. If you do not get your EMI’s stopped here explicitly, SBI would keep deducting it from your account and transferring the amount to this OD account. Please note that if this continues, your OD account would have positive balance but would NOT earn any interest whatsoever.

How I saved my money by paying lesser home loan Interest?

I wrote about how we can own our home in half the time by paying a little extra over and above the EMI every month. This concept certainly helps here when you have the facility of doubling up the benefits with Maxgain OD account. On one hand, you are paying lesser interest to bank on the total loan and on the other hand, you are earning more interest on your savings.

I personally used to transfer an amount equal to the EMI each month to the Maxgain Home Loan account to ensure that I pay lesser interest every passing month. Now, the question arises that if I had the enough monthly income to support a higher EMI, then why the hell I did not opt for it in the first place?

Well, the question is very good and the answer simply lies in the way SBI (or any other bank) calculate your loan eligibility.

In my case, the eligibility just hovered around a total loan of 21 lakhs by all means. Hence, the EMI was set up for 240 months/Rs. 17000 per month.  

Since, I could use the allowances like LTA and medical (part of my salary structure) which Bank did not consider for calculating loan limits, towards my savings, I was able to pre-pay an extra amount each month.

Also, the loan limits by bank are set keeping in mind the current salary levels of a person. The loan tenures generally span multiple years and your income stands a chance to increase.
If your income increases, it should become easier for you to pre-pay more than what was set up bank earlier.

My advice is to pre-pay as much as you can, if you cannot use the same set of money for earning more than, what you are paying as interest on the loan.

  • Chinu

    Hi Anil,
    Thanks for detailed article.

    My home is under construction. I only had 2 disbursement from bank till now. From long time i didn’t get any installment and i had some extra money. Then i paid the full loan amount. Now i got a call from SBI that my account will be deactivates if i didn’t get disbursement ASAP. That means we need to keep some negative balance in loan account. Called SBI people they said get some advance disbursement from builder. What’s your view on this?

  • Hi Chinu,

    I don’t understand your question completely. You are saying that you have paid off your loan in full? If it is true, then your SBI loan account is already closed. isn’t it?

    Or is it my mis-understanding of the whole thing? Please explain.

  • Chinu

    lets take an example:
    Suppose i got a loan approval of 20L.
    My builder ask me for 1Lakh and bank paid 1L to builder.
    Now my loan account balance is -1L. If i transfer 1L to loan account then my reducing balance will become 0.
    Building is under construction and builder will ask for more money as they will make progress in construction.
    Now my reducing balance is 0, bank is saying i should be in negative. Otherwise they will close the account.
    I think If they will close the account, bank will not pay to builder in future if required.

  • In this case, I am almost sure that your EMI is still on. If yes, then you are at loss too. You would not receive any interest on the extra money that you are putting in.

    And yes, Bank is right. Since your bank balance is zero, bank is not earning any interest from this loan. They would be most interested in closing the account.

  • kabaalidaa

    Anil, I have a similar problem. My loan amount is 65L; the amount disbursed so far is 20L; I’ve deposited 14L into my OD account. So I’m being charged pre-EMI interest on the gap of 6L. The remaining disbursements are due in chunks 2 months from now and so forth. The SBI manager calls me saying that I’ll have to give them a letter authorizing them to return the 14L back to me, and that I can only make deposits into the OD account *after* full disbursement. He did not say anything about closing the account if I didn’t do that, but I sensed some level of scare tactics there where he implied things could happen. I asked him to show me the terms and conditions which state that I can’t deposit thus(especially when their online software allows that), but he didn’t have a ready answer for that.

  • Hi Sriram,
    You are right. There are no such conditions on stopping the deposits even if the balance reaches zero.
    The only thing is that bank will not pay interest to you if the balance turns positive.

    I did that myself all over my loan term. But the day my balance reached about 50k, I opted to close the account. Remember that my loan was 90% disbursed at this time.

    I think you should just keep the 14 lakh in the account as it is saving you good amount of interest. If you sign an undertaking with the bank, then you won’t be able to deposit the money again through the whole construction linked phase. That would be a big loss.

    What you can do is to keep some amount in the OD account which can stay in negative for your next 6 months of EMI. That way, bank probably would not nlbe too worried.

  • zero-interest

    Hi Anil,

    Thanks for your article and also all the answers you have been giving. I had a few questions.

    1) Does one need to take an SBI life insurance ? If so is this an yearly premium or is it
    a one shot premium added to your loan amount ?

    2) The above discussions seem to say that we need to maintain a negative balance. If so
    how much ?

    3) Once the loan is fully disbursed, If one had sufficient funds and were to park an amount
    equal to the outstanding principal, then is it a correct understanding that this will turn
    out to be a zero interest loan ?

    4) During the Construction Phase, If one decides to pay the full EMI, will the amount be fully
    disbursed to the builder or is the disbursement schedule decided by us only /

    Thanks in advance,

  • Hi,
    You are welcome and I appreciate your feedback. My answers to your queries:
    1. You would need to buy SBI life insurance unless you have a loan guarantor (someone who can sign as a guarantor for you). In my case, there was no-one and hence I bought the insurance. Is it normally called home loan insurance ( read my experience here : http://www.am22tech.com/home-loan-guarantor/ )

    The premium is paid in one shot and is deducted from your sanctioned loan amount in first month itself.

    2. There is no written rule about maintaining negative balance. But, as evident from above user’s experience’s, they have recieved calls from SBI to maintain some balance or close the loan account.

    I would say maintain balance equivalent to 6 months of EMI if you do not plan to close the loan.

    3. Technically speaking – yes, it would turn out to be zero interest loan. But, if the balance turns positive subsequently as EMI does not stop, bank will not pay you any interest .

    4. Full EMI works irrespective of the disbursement schedule.

    In case of construction linked plan, you have the option of pre-emi or full emi.

    If you opt for FULL EMI, bank would still disburse the money as per the schedule defined by builder and not you.

    The only thing in case of FULL EMI is that you re-pay higher principal in each payment, than you would pay if whole loan was disbursed in one shot.

    Does that answer your question?

  • zero-interest

    Yes.. thanks a lot for the quick response.

  • You are welcome ‘Zero-interest’ 🙂

  • Mallikarjun Reddy

    Hello Anil,

    My Home loan is sanctioned for 55 lacs for under construction property. Got sanctioned the loan from SBI only for safety as I have sufficient funds for next 4-5 installments . I might require the loan amount only in next year 2016.

    My query is:

    I had opted for full EMI. I need to take at least 1 disbursement in six month As the sanctioned is valid for 6 months. Since I have sufficient funds right now. If I take single disbursement in order to keep the Home loan account active and pay it off immediately then principal amount will becomes zero.

    a) Will my loan account will still be active after 6 months? as principal amount is zero

    b) should I have to pay the EMI for next month (i.e 53, 000 full EMI for 55 lac sanctioned amount)

    What is the best option in front of me?

    Regards,

    Mallikarjun

  • Hi Mallikarjun,
    Answers to the best of my knowledge:
    a) Technically, You loan account can stay valid for as long as your loan tenure even if the balance is zero. But, if you read some of the experience’s in comments, people have received call from SBI asking to either get the disbursement done or close the loan account.

    This is understood from the point of view of bank as they are not earning any interest unless you have negative balance in the loan account.

    2. Yes, you will still have to keep paying the FULL EMI.

    It is advisable to maintain some balance (i would say 6 months) equivalent to EMI ( 6* 55k) though there is no such written rule.

  • Raj

    Hi Anil,

    I am holding NRI status and would like to transfer my home loan from HDFC Ltd to SBI Maxgain for the under construction property based at NOIDA. Is it possible to transfer home loan for under construction property? Will SBI sanction home loan for noida under construction property which is not a approved project from SBI but project is already approved from HDFC Ltd.. Just for your information NGT issue is still not resolve in noida. Looking for your inputs.
    Thx. Raj

  • Hi Raj,
    I am not the right person to guide on this matter.

    But, as per my opinion, it is pretty difficult any bank to finance a project which is already NOT approved. I have this experience when I was trying to procure home loan from PNB (Punjab national bank) for my project and it was not already approved. They were demanding ALL the project papers. Now, this gets muddy as the builder would normally not share all those papers with you (as a single flat owner). I dropped the idea of PNB after couple of meetings with PNB manager (they were actually not eager to go forward). I got the feeling that they knew it would not work out even if builder gave me all papers due to bank’s formalities to get all the land and other approval papers verified from various government departments.

    On the other hand, if the project is already approved, you just need to share your flat’s papers only.

    I think I would say, it is possible but you would have to do quite a leg work between Builder and SBI. I don’t think you would be able to manage that being an NRI.

    Just my opinion.

  • Pankaj

    Hi Anil / Any other expert here,
    In today’s position, I’m capable of closing my maxgain loan and plus have some addtional 10 lakhs in hand. However I was advised that I should not close the existing loan. Rather I should invest those 10 lakhs in another property by getting a topup loan on existing loan from my maxgain account and invest those extra money. I was advised that benefit of doing this is that my extra money will get invested quickly plus I will skip all my headache for getting another home loan and save the expenses for formalities. What’re your views on this please? Any advise will be much apprecaited.

  • Hi Pankaj,

    The advice is good but as per my opinion, it has some flaws (as per my own experience)

    1. The top up loan is only given on the same property that the primary loan is for. You can’t invest it in any other property.
    This was the case in 2012 when I inquired about it from SBI. As a matter of fact, I was also thinking of doing the same that you are.

    2. The top up loan process is same as applying for a new loan. You will have to re-submit all the documents and get the verification done unless it is a private bank. Private bank’s are much faster and they would probably re-consider your old docs.
    In SBI, they told me that I have to re-submit a new application (even for top-up loan) and all the verification would be done again. They would charge processing fees too.

    Again, the situation may have changed now. You may need to check with your loan branch office to get more details on the current process and documentary requirements.

    3. The only thing I found to be really useful the parking of extra money in the maxgain account. You technically earn higher rate of interest and can withdraw it to invest somewhere else, in case you want to. That’s the best approach if you don’t want to close the loan account.

    4. You would like to invest this extra sum of money anywhere else, only if you are confident that you can earn more than the interest, you are paying (technically saving) by parking in loan account. Isn’t it?
    If you can, you should invest. Else, keep the money parked.

    When you evaluate a new investment opportunity, analyse the complete return on investment after deducting income taxes and your manual labor.

    I hope this helps.

    Let me know if you need more information.

  • Pankaj

    Brill, your reply is much detailed than what I expected. Highly appreciate it. Yes this helps a lot. In fact there are so many facts those exist that even SBI employees don’t know about maxgain. For example, one can very easily increase his or her EMI just by filling a form and signing and submitting it. I’ve done so twiice in SBI RACPC and its the easiest thing to do. Later when I asked the same to local branch people, they said this is not possible. LoL…

    Secondly I was given the below advise by a person in SBI RACPC itself, which made me assume that I can buy another property on top of existing loan subject to my eligibility of course. I will enquire again with your queries above and revert when possible.

    Lastly I can close the loan in next 5 months of so every easily. My main concern is for getting a genuine advise for investment. I’ve met and exchanged emails with many Charterd Accountants across India, and I was left disappointed
    because of their level of understanding, convencing and attitude of grabbing money. I don’t mind paying fees for their services, but I never found anyone who can deliver the answer or service worth my payment with honesty and genuinity.
    If you can assist me with suggesting what is the best way going ahead with investment, that will be flawless
    thing in my life. 🙂

  • Hi Pankaj,
    To be very frank, I am not the right person to guide on investments.
    I am myself always on the look out for new opportunities to invest but haven’t found anything concrete yet 🙂

    And as per my experience, the easiest way (without risk and without headache’s) is to invest in 390 day bank FD.
    They pay you about 9% per annum. You just have to pay income tax and all money is yours. This income comes without any manual labor, without any investment risks, no insurance to buy to protect this investment, no worries about money getting lost and small lock-in period.

    In today’s business scenario, where bank itself is earning about 10% per annum from you as a customer, you are much better off earning 9% without any worries.
    Keep in mind that bank employs people, pays salaries, pays office rent, advertisement fees and all other expenses to earn 10% from you.

    That’s just my opinion. There are many people who make much more money than 9% on their investment and I am still trying to find them.

    All the best.

  • Hi Raj,

    I think as per SBI Maxgain standard rules they will allow for an under constriction property. You should talk to the Bank once to get the accurate answer. Thanks Anil for putting your point on this as well.

  • Thanks Santanu for sharing your inputs. I appreciate it.

  • Vijay Rajput

    HI Anil,
    This is simply the best information you have put forth for all of us, Thanks for it!!
    I have one query regarding ROI(Rate of Interest), currently its been 10.15% for me under Maxgain OD account. Is this maxgain account has any of locking period over ROI for lets say 1-3 yrs and later after that period it gets floated out more than what would be current ROI for that time.
    Or its just in sync with whatever SBI’s ongoing ROI .

  • Hi Vijay,

    The lock in period is defined by your agreement with SBI. In my case, I had availed the load with a 3 year scheme with fixed interest rates and then it moved to the SBI’s market rate starting 4th year.

    If you have got any of those schemes, then the ROI will remain intact until that scheme expires for you.

    Does that answer your question?

  • Vijay Rajput

    Hi Anil,
    Thanks for info!!
    In my case I guess locking period is not there as I can see when SBI reduced their ROI last month my ROI too got decreased(10.15% to 10%), so is that mean ROI in my Maxgain loan case is been moving according to SBI’s market rate.
    Please have your words on this….

  • Yes, I would say that it is not fixed/locked for you. It would change with SBI’s interest rate change.
    And there is no need to worry regarding the interest rates, SBI is a government bank and they never increase/decrease their rates arbitrary manner.

    Also, you can find the ROI information on the loan agreement that you would have signed. You must have received one copy and it would be clearly mentioned there about your ROI and how will it change (if SBI’s rate changes).

  • Rocky Singh

    Dear Anil,

    Thanks for your assistance.

    I have a query which unfortunately the SBI people are unable to solve.

    I had taken a loan of Rs 54 lakhs. Over last two years have prepaid Rs 20 lakhs ( apart from EMIs) and normal EMIs of rs 53k every months.

    1) My drawing power is Rs 51 lakhs
    2) My available balance is Rs 22 lakhs
    3) My book balance is Rs 29 lakhs ( i.e 51-22)

    The problem is that though I have parked additional amount of Rs 22 lakhs and my future interest is on BB (Rs 29 lakhs) but my drawing power still remains Rs 51 lalkhs. Now my understanding of Drawing Power is pending amount which is calculated on amortisation basis irrespective of prepayments/ surplus cash.

    (a) What is the significance of this drawing power amount?
    (b) If I prepay the BB of Rs 29 lakhs today, my BB become 0- does it mean I can close the account by an application and get my property papers back? But please note that my drawing power/ outstanding principle still remains Rs 51 lakhs- even I make BB zero- what is the significance? What does it mean? I still have to pay this drawing power back i.e Rs 29 lakhs+ Rs 51 lakhs- sounds absurd but please help in resolving this query

    regards
    rohit

  • Rocky Singh

    Another query Anil

    1) Is it that even after prepaying loans (in my case of Rs 54 lakhs- I have prepaid Rs 20 lakhs)- the tenure of loan doesn’t come down?
    Do I have to still pay EMIs for 20 years? I read in some places that in Maxgain neither EMI value reduces or tenure reduces? How is it possible- If I repiad Rs 20 lakhs and my book balance is Rs 29 lakhs- my tenure should reduce from 20 years to around 9/10 years if I just decided to pay off Rs 29 lakhs by EMIs?

  • Hi Rohit,

    1. Drawing power is simply the total (gross) amount that your loan account can service. This is the total amount that you can be given by the bank to you/builder at any given point of time during the loan tenure. Basically, maxgain account is an OD (overdraft) type of account and hence they use this kind of terminology. You can just think of it as the total amount of sanctioned loan.
    2. If you pay 29 lakhs today and bring the BOOK balance down to zero, your liability towards bank becomes zero and you can very well close the account. This is exactly what I did in my case.
    In this case, the OD account will still show the ‘drawing power’ as 51 lakhs, since that was the amount sanctioned for you.

    You should just always keep an eye on book balance as that’s the amount used for charging you interest. The lower the book balance, the lower is your liability towards the bank.

    Does that answer your question?

  • Hi Rocky,
    The concept of Maxgain OD account is a pretty good one and has the answer to your question. This is an account which pays you higher than normal interest if you park your extra money in it. At the same time, you have the option of withdrawing that extra money, if you ever need it.

    It is in no way related to the normal EMI and tenure pre-fixed for your loan repayment.

    Technically, the EXTRA amount that you park in this maxgain account (20 lakhs in your case) is NOT considered a pre-payment by bank, until you actually finish off the loan and bring the book balance to zero.
    But, conceptually, you can consider it as a pre-payment if you do NOT plan to withdraw it, once deposited.

    Look at it from the point of view of the bank and if they consider it as a pre-payment and reduce your loan tenure, they CAN’T offer you the flexibility of withdrawing this EXTRA money, if you ever need it! It would then be gone once you deposit it. You understand what I mean.

    Let me know if you need more information.

  • Rocky Singh

    Dear Anil

    Thanks a ton for your simple answers- highly appreciated. I got your point. Now to just clarify:

    1) I took the loan in April 2013- loan amount was Rs 54 lakhs- if I never had or planned to prepay any amount- the loan would be going till April 2033 and I pay the EMI.

    2) Now I have paid Rs 20 lakhs extra (apart from EMI) from April 2013- June 2015. Now my understanding is that, if I just foLlow EMIs from June 2015 onwards- by Sep 2021 I am able to bring my book balance to zero- i DONT TAKE OUT ANY MONEY FROM AVAILABLE BALANCE- This is derived from the SBI maxgain loan calcualtor available in

    emicalculator.net/wp-content/uploads/SBI-MaxGain.xlsx?2197af

    Is the understanding correct. If you need I will mail you my calculations? Request if you can share your email id

    regards
    rohit

  • Hi Rocky,
    1. Technically yes, the loan account would remain active till the last month/date as was fixed while taking the loan. In your case, it is 20 years.

    2. Yes, your understanding is correct. The book balance will reach zero balance much before 2033 and prabably sometime in 2021.
    So, at that time, you will have the option of just reaching out to your SBI and ask for account closure. Since, you would have zero balance at that time, they would have no objections.

    On the other hand, if you DO NOT close the account yourself and ask for STOPPING the EMI, it would still be ACTIVE and SBI will keep deducting EMI’s. Now, you would start accumulating negative balance in your ‘BOOK BALANCE”. Please note that SBI will NOT pay any interest on this negative balance.

    So, the onus would be entirely on you to close the account once it reaches zero balance.

    3. If you have any more queries, you can either write them right here in comments (it helps other’s too when they read comments and answers).
    or write to me on
    anil.gupta@am22tech.com

  • Rocky Singh

    Hey Anil

    Thanks. You have a great knack of explaining concepts in the language of the user- highly appreciated-and you are able to sense the problems deep. This is a very good capability.
    Regards
    Rohit

  • Thanks Rocky for your kind words. I appreciate it.

  • Rocky Singh

    Dear Anil,

    I understand that if I am putting my surplus cash in SBI maxgain- the extra cash helps save me 10.25% per annum interest on the extra cash- alternatively- that is the money I gain- now:

    1) I am able to take tax benefits on the interest+ principle of Rs 1.5 lakhs on home loan. So are we saying that not only we save 10.25% interest but also get this tax benefit on our overall salary income?
    2) As I am not technically earning interest income in OD account- no income tax on sbi maxgain interest saved- kindly confirm?
    3) If I compare now a FD investment of 9.15% (PNB) with zero tax (provide form 15g) with investing surplus cash into sbi maxgain and saving 10.25% on surplus cash- is it fair to say that the latter is a better option i.e putting surplus cash in sbi maxgain? But I think we will need to consider one aspect- FD increases per annum on increasing balance and sbi maxgain interest savings is on reducing book balance. Let me know your views.

    regards
    rohit

  • 1. Yes, your understanding is correct.
    But note that you can claim tax benefit only if you have got the possession of your property. You will need to submit possession certificate.
    2. Yes, thats correct too as per my understanding.
    3. You can’t really escape the income tax on FD. Even if bank does not deduct TDS on FD interest, it is still counted as your income.
    You will have to add it to your total income while filing ITR and then you will pay tax, if total income goes past the minimum tax exempted slabs .
    In your case, it would certainly be higher as I assume your yearly income comes under the highest 30% tax bracket.

    Do note that the bank only deduct a nominal TDS (if u dont provide form 15g), just to cover up the advance tax that you are supposed to pay on your interest income.

    If you now calculate, parking money would certainly yield more benefit than FD. If you leave compounded yield aside for easier calculation, you would be paying 30% tax on 9.15% interest. Which comes out to be roughly 2.7%.
    So, your real net yield after taxes would be somewhere around 6.5% on money invested in FD.

    Does that make sense?

  • Vijay Rajput

    Thanks Anil 🙂

  • You are welcome

  • Basu

    Hi anil , I Dr Basavaraj , NRI , I want to construct home( estimated 50 lakh) , I have cash of 50 lakh ,
    1) should I opt HL max gain or should I construct with my own cash ,
    2) can put my 50 lakh in NRE FD ( Tax free) and pay emi with this interest earned
    3) As i may need liquid cash in near future , ( returning back India in 2019)
    Plz give your suggestions as i am in confusion ,… some says …loan brings psycological tension so construct with own cash , ……..other says take HL ( max gain) will save Income Tax when u return India……

  • Hi Basu,
    Taking a loan when you have the cash in hand is not a good idea. At-least i think like that. On the points you have mentioned, here is what I think:
    1. You should use your cash, if it is lying idle and you do not need it for anything else.
    2. NRE FD interest is TAX FREE ONLY in INDIA. You have to pay tax in the country of your residence. If you are in USA, you would be paying around 40% tax on the interest you earn on NRE FD. Other countries may have different rules for Indian income.
    3. 2019 is 5 years away. You can save a lot of cash till then. If you take home loan, you would still draining your cash by paying interest to bank.
    If you think that you can park this money in Maxgain loan account and earn higher interest than the NRE FD, you probably are right but to a certain extent.

    If you take loan of 50 Lakh and then park all 50 lakhs in Maxgain account, your net benefit would be ZERO. SBI would not pay any interest if the book balance is zero in maxgain account and you would be asked to close the account.
    If you keep some balance (lets say park only 40 lakhs) and leave 10 lakhs book balance, you would be paying around 10% per annum interest on this 10 lakh to bank.

    It does not make any sense to me to get into this complexity when you have ready cash.
    Think from the point of view that bank is not a non-profit organization. They are doing business and want to make money out of you. If they can’t, you are useless for them.

    Let me know if you need more information.

  • zero-interest

    Hi:

    I have bought an under-construction property and applied for SBI Max-Gain.

    I am told by RACPC that they would hold the 15% of the sanctioned amount till the registration is done.
    The amount of sanctioned loan is about 60% of the cost of the flat. ( The same as I applied for).

    However the builder is insisting on full disbursement before going for registration.

    Is it common for SBI to withhold 15% till registration ? Or is there some mistake in my interpretation.

    Thanks.

  • This basically means that SBI has also counted the registration money in the sanctioned loan amount. There is no need to worry.
    SBI’s representative will hand over the cheque directly to builder on the day of registration (after taking over the property papers). SBI’s representative will visit the registration office himself and get all the formalities done in front of himself.
    Your builder should already know this process and should have no problems with it. His payment is safe.

  • Rajesh Prabhakar

    Hi Anil,

    1) I have taken my home loan through SBI Max gain. and, have a simple query on this.

    There is one lakh rupee remaining in my loan A/c, means bank had sanctioned 23lakh loan but I drawn only 22 Lakh.

    So will there be any interest bearable by me on this 1 lakh. Or, do I need to pay interest on 22 lakh only?

    Please resolve my query.

    2) In bank statement( loan) there is a term ‘DEBIT INTEREST” the fixed amount is being deducted on the last day of every month, may I know what it could be?

    Thanks,
    Rajesh

  • 1. You will only be charged interest on the amount that you have drawn I.e. 22 lakh.
    2. Debit interest is the monthly interest on the amount that’s pending on your head. This is the interest on 22 lakh in your case.

  • Rajesh Prabhakar

    Thanks a lot!! 🙂
    Just I read the term “Park”…so do I need to go through any formalities with bank official to freeze this remaining amount?

  • If you don’t want to withdraw the remaining sanctioned 1 lakh, you have to give ve it in writing to bank to stop any further disbursement.

    Bank will issue you the cheque book for max gain account only after you submit this declaration.

    This will help you park and withdraw funds as you desire using cheque book.

  • Rajesh Prabhakar

    Thanks a lot….really helpful!! Much appreciated 🙂

  • You are welcome.

  • Venkatanarayanan Sridharan

    I have one question: AT the time of opening the SBI maxgain account, it is a pre – requisite to have a savings bank account in the city where the loan is availed. Once the loan is sanctioned, should the savings bank account be maintained till the duration of the loan sanction i.e. 20 years or can it be closed? My coincern here is this, I would have mutiple savings bank accounts in SBI at various locations, and am wondering what is the need.

  • There is no requirement to keep the savings account open, if yu don’t want it.
    Just get your loan approved and close it. They can’t deny it.

  • Srinivas

    Hi Anil, I deposited 5 lakhs into the max gain OD account, but balance is showing lesser than the deposited amount. It has deducted around 7 thousand. Are there any charges if we deposit the amount into the max gain account ?

  • There are no charges for depositing or withdrawing money from Maxgain account.
    This 7 thousand must be something else.

    I can’t really comment on what it is unless i can see the description for it.

  • Ashok Raman

    Hi Anil,

    Thanks for the article. It is highly informative. I havent done the leg work to understand the benefits of the Maxgain account.

    When I log in to my account, I see book balance is negative and there are typically two sets of transactions on a monthly basis. NEFT Transfer (EMI) and Debit Interest. My O/S is about Rs. 25L (I had initially taken a 29L loan).

    My book balance is negative at about 25L and I see another ‘Available Balance’ which is positive at about Rs. 1L. The drawing power is the sum of the two (approx. 26L).

    Can you explain exactly what the three terms are? And whether I can use the positive balance to start making part prepayments?

    Thanks,
    Ashok Raman

  • Hi Ashok,

    Here are the answers to the best of my knowledge:
    1. The book balance is always the real figure which is DUE from you. It is the net result of what bank has disbursed, added as interest and what you have paid bask as EMI or deposited extra amount to save on interest.

    Book balance = Total amount bank has released so far + interest debited to your account – EMI’s paid – Funds parked by you to save interest.

    Book balance is the amount which Bank uses to calculate interest for next month.

    2. The available balance is the amount which you can still use from your loan account. This would certainly increase if you park extra funds, but would not show the exact amount that you parked intentionally. Not sure why SBI does that!

    3. Drawing power is the total amount of sanctioned Loan amount. This is the maximum amount which bank is allowed to disburse to you.

    I did not understand your last question about ‘positive balance to stat making part pre-payments’. Please elaborate.

  • Ashok Raman

    Thanks for the clarification. Think I have understood the concept. No worries on the last bit as it’s no longer a valid question.

    I havent received any cheque book or debit card to operate the maxgain account. Would i have to call up SBI and request for that? Shouldnt they be sending some kit with these once I have taken possession of the property (it’s been 3 years).

    This happens to be a great product, but unfortunately it’s not being managed well either by SBI nor by me. Instead of dealing with an institution, I end up dealing with people who dont seem to know the complete information. Such as all this while, I always thought that the amount that I keep in my savings account is offsetting against the principal in order to calculate the interest. Clearly what I see is that the savings account and OD dont have any linkage beyond SBI’s intiial requirement to have a savings account in order to be eligibile for the Maxgain OD account. Never have I been told by anyone at SBI that I need to park funds in OD account directly rather than in savings account.

    Thanks,
    Ashok Raman

  • SBI will be SBI. You got to find your way on your own!

    SBI will not send the Maxgain account cheque books on its own. You have to visit the branch (where your Maxgain account) has been opened and request for it. They will issue it only if the full loan amount has been disbursed.

  • Ravi Kumar

    Hi Anil,

    I have taken a loan of 20L from SBI. Possession of the flat and EMI started simultaneously. I have been paying the EMI from Nov 2015. I parked Rs 3000/- in my max gain account last month. On 30th, Available balance was Rs 3000/-, but today it is showing Zero. As per the max gain account benefits, I can park and withdraw amount. Right? Can you explain me am I missing something here or is it some mistake from bank?

    How can I differentiate what is going for Interest and what is going for Principal repayment?

    I see some difference in deductions with description “Debit Interest” for the months November and December. Please help me.

  • Hi Ravi,
    1. Yes, you can park the funds in Mazgain account and withdraw ONLY if you have got the possession and have received the CHEQUE book from bank.
    2. The amount you pay extra (or park) in this account is deducted from your total principal outstanding to calculate the interest. The days in which this extra amount was parked would have had the lower principal. It is all done automatically. You do not need to take any action for it.
    3. I can’t advise on what happened with the Rs 3000 without looking at the transaction details. You can share a screen shot and attach it in comments, if you want.

    Does this answer your query?

  • Hi Anil,

    my home loan requirement is only 15 lac. but to get benefit of SBI max gain I need to take 20 lac as that’s the min loan amount one can take. my apartment is under construction right now and may get possession by DEC-2016. so I just calculated the total interest I end up paying for 15 lac for a tenure of 8 years I end up paying around 6.6 lac extra to bank. while I can go for 20 lac for a tenure of 15 years with max gain. I’m little confused as to which one would be more beneficial as I can generate surplus amount every month. kindly guide me on this.

  • Hi CreativeIndian,
    1. Maxgain account is the best option if you plan long term.
    2. Bank only charges interest for the amount that they disburse. In the case of under construction property, you normally DON’T pay full amount to builder in full. The payments are tied to construction stages and hence you would actually be paying lesser interest over the time.
    3. It is better to get the loan sanctioned for 20 Lac and then only take 15 lacs. Simply just don’t get the extra amount disbursed and pay it from your own pocket, if you have it.

    Does that answer your query?

  • Thanks Anil. that helps.

  • Ravi Kumar

    yes, Thanks Anil.

  • You are welcome.

  • Ravi Kumar

    HI Anil,

    Currently, I am the holder of Home loan and have been paying EMIs. Is there a possibility to convert it into joint? We are staying in the flat and it is on my name. What should I do to include my wife’s income in the EMI and get her tax benefit?

  • Loans are normally not converted into joint mid-way. You can ask the bank though if they will be able to do it. But, I doubt.
    On the other hand, you can get the loan refinanced with same bank with both you and your wife as applicant.

    You may also get a better interest rate if you go for refinance.

  • Barnali Moitra

    Hi Anil,

    I have a Max Gain OD home loan recently i have taken car loan. Would you suggest to withdraw money from OD account and pre pay the car loan? Is it even possible? Both the loans are from SBI. I haven’t parked much.

  • Hi Barnali,
    It depends on the interest rate difference on your home loan vs car loan.

    If the car Loan interest rate is higher than home loan, it makes sense to pay off the car loan first. And that too if you have parked some money in Maxgain OD.

    For e.g. if Home loan is at 10% and car loan is at 12% (assuming car loans rates are always higher), you would gain 2% on the amount that you pre-pay in your car loan directly.

    Please note that you can ONLY withdraw your parked funds from maxgain, if and only if, your loan has been fully disbursed or you have taken the possession of your property.

    As far as allowing by SBI is concerned, they don’t care about it. They are two separate loans for them and are serviced by two different departments. You take out money from Maxgain and pay it in Car loan account. Its your money.

  • Barnali Moitra

    This is helpful. I have been reading your replies, thank you so much for your help. Your knowledge about this is commendable.

  • You are welcome Barnali. I am glad it helped you.

  • Rakesh

    Hi Anil, for loan tenure of 20 years, If I get surplus amount after 10 years then Can I close the account in one go? If yes then would it be applicable for both Max gain and regular home loan?

  • Yes, you can close the loan anytime during its tenure. It does not matter what loan account type you have. You just need to pay off the remaining amount and close it.

  • Rakesh

    Hello Anil,

    loan sanctioned is 35L and disbusrement of 22L is in next week. I am having saving of 22L. I was thinking to pay the builder this amount and reduce the loan amount from 35L to 13L (35L-22L). I contacted SBI reperesntative he said the agreement is done now, it cannot be changed.

    1) Shall I transfer my saving to Loan account? Where to transfer, in Saving account or in Max gain loan account?
    2) By putting surplus money in loan account I can save my interest but principal will be my loss and at the same time paying full EMI. For example EMI of 36K for 18 months sum up to 7.8L and Interest earned is 5,6L, so there I am loosing 7.8-5.6 = 2,2 L in Principal?

  • Hi Rakesh,
    1. You should park your surplus funds in Max gain account.
    2. I don’t understand your calculation. On what principal did you calculate and on what percentage?
    Remember bank will only calculate interest on the amount it has DISBURSED. In your example, it would be 22 lakh not 35.
    The EMI always contains the interest and principal portion. In your case (if only 22 lakh is DISBURSED), there will be zero interest.

    Now, This principal (full 36k for 18 months) would be adjusted with your loan amount later when they disburse amount over 22 lakh.

    On the other note, I think bank will ASK you to close your loan account if you park full 22 lakh in loan account. SBI is not earning anything if you do that.
    To keep the loan active, I would suggest you to park only 20 lakh and not full 22 lakh.

  • Rakesh

    Thankyou so much for prompt reply.

    On principal of disbursed amount i.e. 22L and with interest rate 9,55%, I have done that calculation. The actual values you see in attached image . You see for 18 months from April16 to Dec17, EMI of 36K sum up to 7.68L , Interest earned is 5.69L and Principal is 1.98L. Isn’t this principal that I am loosing in the end?

    As per your advice I wont put the full amount 22L in account but rather 20L and in next payment request from builder I will pay the remaining 2L plus my saving. So I will not be in need to take later from bank . Will it be ok to do so?

  • Hi Rakesh,
    I don’t really understand what you are trying to do here with the real loan.
    If you already have enough money to pay to builder, then why have you opted for loan?

    I am asking this simply because, bank is smart enough to find this trick and will, at some point ask you to close the account (if you park almost 90% of loan amount into it all the time), if you are technically NOT paying any interest to them. They are into money lending business and need interest money from you, as consumer.

    To answer your question about losing principal amount: No, you will not lose it. Bank will adjust it later in the amount that would need to pay, if you get the remaining 13 lakh disbursed.
    If you never get that 13 lakh disbursed and finance all the amount yourself (from your savings), then you would need to give a written application to bank for closing your loan account and pay you back the amount that you have already paid as principal amount.

    Note that they will NOT pay any interest on any surplus principal that you would have deposited. Only the principal would be returned.

  • Rakesh

    Hello Anil,

    your question makes sense and here I clarify. After the agreement, I managed that amount i.e. 22L. In the present time I am in need of loan of 35-22= 13L and not 35L. If I had 22 L before agreement then definitely I would have paid directly to the builder and have reduced loan amount may be to 13L. The loan agreement has been already made now and I haven’t requested bank to make payment. I am thinking of paying my saving to builder and then whenever builder demand payment as building progresses, then I would ask Bank to pay.

    Thanks about clearing my confusion on principal. I was in disbelief that it will be lost.

  • You are welcome.

  • Vijay Prakash

    Hello Anil – Myself have taken an home loan of 35L sanctioned on Apr 2015 and started paying EMI (30974) from Oct 2015. I wasn’t sure how this MG account is beneficial compared to other Home Loans and your article gave a good insights. But still i have some clarifications.

    1. How or What is the process to pay extra amount along with EMI monthly ? Do i just park that amount in the MG OD Account or is there other ways.

    2. If i get a lump some amount where i would like to use that amount as part-payment, what would be the process to get this done

    3. Doing part-payment will reduce my tenure and not EMI, is this correct ?

    4. Since the interest are high as mentioned in your article, i believe we can have this account till we complete the home loan and not beyond that ?

  • Rakesh

    Hi Anil,

    one more query if the surplus say 5L is put in loan account then can this sum kept as advanced EMI because generally bank deduct EMI from other account (saving account). Thanks

  • No. The EMI has to be paid from an account other than maxgain.

  • Rakesh

    Thanks 🙂

  • Hi Vijay,
    Here are the answers:
    1. Just transfer the extra amount to your MaxGain account as you would transfer to any other savings or current account.
    Online transfer, check deposit, cash deposit in bank branch all work for MG account.

    I used to transfer directly using SBIOnline website from savings to MG account.

    2. Depositing money in MG account is as good as lump-sum part payment. In-fact, it is better than part-payment in the sense that you can even withdraw this amount, in case, you feel that you need it, anytime during the loan is ACTIVE. The other benefit is that, you only get charged interest on the ‘total loan disbursed’ – ‘amount parked in MG’ as explained in above article.

    3. If you directly deposit part-payment and NOTIFY bank that you want your EMI amount to be reduced OR want the total tenure to be reduced, then you cannot withdraw this surplus amount from MG account later.
    If you deposit surplus in MG account, there is NO reduction in either EMI amount or TENURE. They remain same as earlier.
    But, the interest portion of the EMI reduces automatically. You do need to do anything for it.

    4. Yes, the day you bring the balance down to zero, bank WILL close this account. It also closes once the loan tenure has finished.

  • Vijay Prakash

    Thanks Anil, that really helped. Let me summarize my understanding, along with some further clarificaitons:

    1. If you have surplus amount or even a small amount, which might be needed later, we park this into OD account, this automatically reduces the interest portion of the EMI, however the EMI and the tenure goes un affected.

    2. If we need to reduce the tenure or change the EMI, then we inform the bank and bank changes accordingly however the surplus amount parked is no longer accessible. In this case i send an email to bank on the amount parked in OD account and ask them to consider this as “part-payment”, so bank accordingly adjusts the tenure or EMI, is this correct ?

    Is there a calculator for this SBI Maxgain with part payment ? where i could picturize the changes by part paying.

    You mentioned parking amount in OD account attracts 8-12%, is this correct ? How could we verify this.

    Once again thanks for all the help !

    Regards
    Vijay

  • 1. Yes, correct.
    2. I don’t have any calculator for it.
    Technically, bank does NOT pay you any interest for parking money in Maxgain account.
    It is the money that you SAVE on interest, that you would have otherwise paid as loan interest, for the amount that you are parking.

    And that saving is obviously equal to the rate of interest of your home loan.

    Remember, if there is no interest payable on your side, you actually do NOT gain anything.

  • Amit

    Hello Anil ,

    I have taken HL of 32L from SBI Max Gain. I have around 4L remaining in the HL account. I am getting the possession of the flat in this week. After submitting possession letter to the bank, can i transfer 4L amount to my savings account ? So i can use it for furniture purposes. I dont have transaction rights to transfer money from HL account to Savings account right now, which i will get after submitting possession letter . Waiting for your reply . Thank you !

  • Hi Amit,
    I don’t think you can use the HL sanctioned amount anyway to your savings account. Bank will never allow that unless it was sanctioned specifically for FURNITURE.
    Bank will only pay this amount directly to the builder.

    If you don’t use that amount to pay off builder demand, you can’t use that money.

  • Rohit

    Hello Anil,

    I have a maxgain home loan taken in 2014 for 25 lakhs, and i currently pay 30k every month as an EMI that goes into my OD account, right now it shows -24,17,725.00 as balance can you suggest a way how i can close the loan within next 7 years?

  • If I understood your question correctly, you are looking to pay off the loan amount in next 7 years.
    To do this, you will certainly have to pay a lot of extra payment every month.

    Instead of putting extra savings in savings account, put them in Maxgain OD account. This way, your loan interest for the amount you pay/park extra, would be zero and hence would help you pay it off much faster.

  • Shivakumar Ganesan

    Hello Anil,
    I have a MaxGain loan with an outstanding of 22L and an EMI of 32K. At the moment only I’m paying this EMI. Recently my wife has started working & we are in a position to increase the EMI upto 50K. This way both of us could avail the tax benefit in proportion to our contribution. But bank is not allowing to increase EMI. Also bank says min 20% of outstanding is needed for part prepayment. These are not written in the contract document anywhere? Can you suggest the way forward here.
    Regards
    Shiv

  • Just don’t make the pre-payment.
    Instead, park the extra funds in maxgain account and you will still get the same benefit as you would have, if you make a pre-payment.
    Also, avoid asking for an increase in EMI. Just keep parking the extra funds (18k inyour case) per month in Maxgain account.

    The whole concept has been explained in above article.

  • Sujay Dixith

    Hi,
    Iam planning to take a housing loan of 22 lakhs under Maxgain and i have equivalent funds available with me which i may not require for another 10 years. If i opt to park the whole amount for next 10 years and avail a repayment period of 10 years, will i be left with 22 lakhs at the end of my loan tenure with my housing loan stands closed ? Does that mean i will be paying out all the EMI for the entire loan only from the interest i gained every month with my parked amount ?
    Thanks in Advance for your clarification.
    Regards..
    Dixith

  • Hi Sujay,
    The bank knows that people can do the thing you are trying to do. So, they normally look at your remaining loan balance and expect you to at-least have 6 months of loan balance (monthly EMI * 6) to keep the loan account open.
    Else, they will ask you to close the loan immediately.

    So, if you want to park your money there, you can do it, but, make sure you have sufficient remaining loan balance to keep the EMI running.

    Please understand that they are int he business of earning money through interest.

  • sudhir srivastava

    Hi Anil,
    I am having NRO, NRE and MaxGain OD account with SBI, My question is
    1) Can i transfer Surplus saving money from my SBI NRO/NRE account to SBI MaxGain OD account?
    2) My Home loan EMI is not started yet, The EMI which i pay will go to the OD account and on top of that can i park surplus savings into MaxGain OD account to save more in terms of interest.
    3) can i increase the term of my home loan at any given point of time? If yes then how?

  • Hi Sudhir,
    1. Yes, you can transfer money from NRO/NRE to Maxgain OD account.
    2. Yes, you can park surplus money in Maxgain to save on interest.
    3. The increase in tenure is not a simple matter. You will have to talk to bank once again and they will re-evaluate your loan again to make a decision.

  • vks_learner

    Hi Anil,

    I have a query here for my max gain home loan:

    Available Balance 5,45,037.00 // I dont need this now Final disbrsedment – DONE
    Book Balance 20,52,828.00
    Drawing Power 25,97,865.00
    Loan Tenure 30 years
    ROI- 9.45%

    Now i asked SBI to start my full EMI as till now it was pre-emi using my cheques which i have given to SBI for my pre-emi

    As i am out of India so SBI asked me to fill a form with SBI saving accounts, EMI date, SBI home loan account, month etc… and will start ECS/SI from nect month onwards.

    As you can see i have not utilized full drawing amount so full emi ECS should be around

    Rs.17125 but SBI told that they have calculated EMI as per drawning given at the time of loan account open

    ROI 10.15 %
    Tenure 30 years
    Drawing Power 25,97,865.00

    So my EMI is now 23299 , this means i am paying everymonth 6174 Extra

    My query

    1- Where this extra paymnet will go, will this reduce everymonth my principle
    2- intrest charge or EMI will be as per book balance only not as per drwaing power??
    SBI agent told you can ask SBI to recalculate to EMI 17125 once you submit your possesison letter next month end.
    but i am ok to 23299 every month now , is it ok i pay or should i reduce my EMI as per book balance ??

  • Hi VKS,
    It is always better to pay as much as possible within your means. This helps pay off more Principal amount with each EMI.
    The more principal you pay, the lesser interest would be charged on next EMI and hence you will pay the loan off earlier.

    Don’t worry about the interest portion. It is always calculated on Book Balance amount i.e. the amount that you owe at any given point of time. Drawing power amount is the total amount that’s available for you to withdraw i.e. the sanctioned amount of loan. This may or may not be equal to the book balance.

    Even if the EMI has higher amount per month, the interest and principal portion would be rightly calculated by bank. Its an automated process and hence there is no need to worry about extra interest being charged. They have all the checks in place.

    Let me know if you need more information.

  • Ashay

    Hi Anil,

    When will I be able to transfer the extra fund to the maxgain account? I am done with all the disbursements to the builder. Is it necessary to submit the possession letter to the bank?

  • You can park extra funds in Maxgain account anytime. There is no such requirement of ‘waiting for full disbursement’ or submitting possession letter to bank.
    There conditions are mandatory ONLY for getting a cheque book (to withdraw extra parked funds).

  • Rupesh Verma

    hi Anil

    Thanks for such informative article

    Just one doubt – I have taken loan insurance of SBI Suraksha

    Now on online banking page – I get to show separate account number for this Loan insurance account, mentioned as loan account. Above I can already see two account – HL Max Gain account & SAvings account

    why tis extra Loan insurance account number is provided. Any usage ?

  • I have not seen this loan insurance account number earlier.
    May be, they have now started showing up in the same online account.

  • Manoj Thapliyal

    Hello Anil,
    I am planning to take home lone and evacuating SBI, Max gain, HDFC and IDFC Short and Sweet(similar to Max gain). Which bank would be better. IDFC is offering better interest rate than SBI for its Short and Sweet(similar to max gain) product. Also IDFC not changing any processing fee. Is there any preference which bank we should shortlist if we take loan less than 30 L, 30-75 L and more thn 75 Lac. I am inclined towards IDFC but they are new entrant and not sure how it will respond in future in terms of required paper for various reasons.

  • I would prefer SBI bank over anyone else simply because it is a government nationalized bank. They do have better polices when it comes to pre-payment penalties and rate of interest changes. Private bank will MOST certainly be easy when you are a new customer, but will try to fetch as much money as possible out of you, once yuof you, when you start re-paying.

    If you still want to go with Private bank, do read the fine print and this article may help you ask questions to bank sales team:
    http://www.am22tech.com/gov-bank-vs-private-bank-loan-india/

  • Manoj Thapliyal

    Thanks Anil for this elaboration. One more question. I approached SBI through 2 agents who are retired SBI officials and also directly to Bank. The bank official gave clear information and effectively lesses interest rate. The agents tells me about more interest rate. I am confused. Even Bank official finally referred me to some retired bank official to process the loan. and all three tell me different interest rates. Whom should I go. Does SBI also do bargain on interest rate?

  • SBI directly would not bargain. The agents certainly will make money on the SBI base rate + Top up rate (that they will agree with you).
    I would strongly ask you to go directly to BANK. No agent works for free even though they will claim that they are working for your benefot and will offer lower rate.
    That’s NOT true. Deal directly with SBI branch to get the LOWEST BASE RATE.

    If the branch you visited did not entertain your request, try nodal home loan branch (they are bigger branches that only deal in LOANS) in your area. They have their own sales employees who can get you the SBI’s published rates.

    Remember, if you deal with an agent, you will always be negotiating on the SBI’s published rate + something. It will never be lower than the published rate.

  • Manoj Thapliyal

    Thanks Anil for your suggestion. I need one for suggestion. SBI has pretty high processing fe MODT charges etc. While SBI, HDFC insist on having this MODT changes, private bank like ICICI, IDFC do not charge MODT and hence their overall processing charges is very less. in case of SBI, the over all processing including MODT, CERSAI act it comes out to be apps 50000 if you take loan 1Cr and above. Even public bank like PNB doe not take MODT charges etc. MODT is 0.2 to o.3 % of loan amount. What is purpose of MODT and why it is required? IDFC used to charge it earlier and now they have removed it.
    Can you throw some light on this aspect of MODT and CERSAI?

  • I would suggest to go with a government bank that’s charging lowest interest with no other charges like MODT.
    This is a new charge that banks have started charging.

    MODT refers to memorandum of deposit of title deed. This fee is charged for an undertaking that you are submitting your documents to the bank with your own will. It might cost 0.1-0.5% of the total Home Loan.

    MODT in simple terms means that bank will register your documents (the original docs) with government and if they do, government will charge the stamp duty. To cover the costs of stamp duty, they charge you.

  • Manoj Thapliyal

    Thanks Anil. Appreciate prompt responses. It helped me deciding my home loan.
    Regards
    Manoj

  • Binish Sb

    Hello Sir,
    Below is my details from my SBI Maxgain statement summary-
    Book Balance: -5.5L (rounded to nearest zero)
    Available Balance: 22.6L (rounded to nearest zero)
    Limit: 28.1L (rounded to nearest zero)
    Uncleared Balance: 0
    Drawing Power: 28.1L (rounded to nearest zero)

    1) With above summary, does it mean i have to pay 5.5L to SBI to close my home loan account?
    2) I took the above home loan in 2014 and along with homeloan i had also opted for RIN RAKSHA. Every year i have regularly paid the yearly premium of RIN RAKSHA i.e. from 2014 till date i have paid the premium 4 times and next premium due is on Apr 2018. At the time of loan disbursement, i was told i need to pay the premium of RIN RAKSHA for 5 yrs. If i close the homeloan BEFORE Apr 2018 do i still need to pay the last premium of RIN RAKSHA?
    3) If i close the homeloan AFTER Apr 2018 will i get any refund from the premium paid amount of RIN RAKSHA?
    4) While closing the home loan, is there any specific document which bank will handover to us as a proof that homeloan amount has been settled with zero dues? if yes, what is the document called?

  • 1. Yes, book balance + interest due (on the date of your closing) is the amount that you need to pay to close home loan. This interest would be the amount from your last EMI deduction date to current date.

    2. If you do not pay the premium, the policy will automatically lapse. Normally, they do return the premium but the process is a bit hectic. In my case, i had paid the full premium at the start of loan (a mistake that i made), and never got the premium back, even when i had closed the loan in 4 years flat. I also did not had time to follow up with SBI insurance (as it is a separate company and department all-together than home loan).
    If you do not want to pay the Premium, you have the option to do it and claim that you have closed the loan.

    3. Usually, you should get the premium refunded but you will need lot of follow up with the insurance company.

    4. After the loan closure, bank will give you a NOC (no objection certificate), if your builder needs it, a loan closure certificate and will return all your original property papers to you. NOC would be required if you need to register property on your name.

  • Binish Sb

    Many thanks for your response ..!!

  • You are welcome.

  • Bhargav Kulkarni

    https://uploads.disquscdn.com/images/bca16ae5e0e227542ad828a6f8c44af138282d85b649e8594940f76340c0c94f.png Hi Anil,
    Can you please explain the formula used to calculate interest. The simple formula I used to know is principle * Rate Of Interest / 36500 * number of days (30 or 31). But this formula fails when I compare my account statement. In below screen shot of my account statement can you please let me know how did the interest for march 2016 calculate?

  • What is your loan’s rate of interest? I can’t really calculate anything without knowing Rate of interest.

    You should calculate interest for two periods in a month.
    from 1 Mar 2016 to 9 Mar 2016 and then 10 Mar 2016 to 31 Mar as the balance on 9 Mar changes due to your payment.

  • Bhargav Kulkarni

    Ohh yes, sorry for insufficient information. ROI is 9.35. Yes I have tried to calculate the same in two parts as you have said, but still the difference, may be something wrong on my part while calculating.

    First Part => 2132376 * 9.35 / 36500 * 9 = 4916.15
    Second Part => 2109776 * 9.35 / 36500 * 22 = 11889.89
    Total => 16806.04

    Hence Rs. 354 extra deducted.

    Please helpcorrect.

  • Your formula is correct except the following:

    The interest for first part should be for 8 days. Since, you made a payment on 9th, they would count the day’s ending balance for that days interest.

    Even after making these two fixes, i still do not get the interest amount to match.

    I strongly feel that your rate of interest would have been something else.

    Did you check with SBI if they increased the ROI for you?

    If i do the reverse calculation to find rate of interest, it comes out to be 9.55% and then the values with SBI match accurately.

    Can you check with SBI if they actually increased your ROI to 9.55?

    https://uploads.disquscdn.com/images/1e72a51ab3bc9cc482d604e37d64f18b5e17bcc73c55299349ca3a7403f88735.png

  • Bhargav Kulkarni

    Yes will check. Thanks for your time Anil 🙂

  • You are welcome.

  • Shwetha A.N

    Hi Anil
    I am currently in US and want to know is the interest rate less if we transfer to NRI Home loan account.Currently we have Max Gain Account with SBI.

  • If i understand correctly, you have NRI loan account with SBI?
    If yes, then whatever changes are there in interest rate, SBI will inform you about them

  • Shwetha A.N

    No i do not have NRI Home Loan account with SBI.

  • Then, check with SBI.
    Normally, the NRI accounts are also maintained in INR currency and hence they also carry the same interest rates.

  • Shwetha A.N

    Thanks a lot..

  • Ranjith

    Hi Anil,

    The service you do by clarifying our queries is much appreciated. Below is my query regarding my MG loan. Request you to please clarify.

    I am paying an EMI of Rs.32515 from May 2015. The loan amount is 30 lacs which is fully disbursed. I have few queries. Appreciate if you can help me out.
    1. In 2016 interest certificate I noticed the total repayment is given as Rs.358913 (Principal Rs.100269 + Interest Rs.258644). However my actual repayment of EMI is Rs.390180 (32515*12). Need to understand where is the difference Rs. 31267 (390180-358913) accounted.
    2. Till now the interest debited from HL account is not more than Rs.20500 (each month). It varies every month but this is the max is 20500. Assuming that atleast Rs.12000 out of my EMI is principal component, then from May 2015 to Sep 2017 it should be Rs.348000 (12000*29 months). But the drawing power is still Rs.27,96,337. I guess DP is the current outstanding principal. So in that case, my expectation is it should be 3000000 – 348000 = 2652000. My query is why the principal portion of EMI is not getting adjusted to principal outstanding. Other details are given below. Kindly help in clarifying.
    Book Balance: -2389979.16
    Available balance: 406357.84
    Limit: 2796337
    DP: 2796337
    Let me know if you require any further details. Thanks in advance
    Regards,
    Ranjith

  • I can’t really understand or explain the reason behind the discrepancy in numbers without looking at the account statements.
    On the other hand, there is a high possibility that you have missed out on some point as bank uses software to handle the payments and the chances of error very low.

  • Ranjith

    Hi Anil, May I share my statement and my analysis to your mail id? Please let me know if you can help on this. I am actually thinking of moving my account to standard home loan (If SBI does not permit this, then someother bank)

  • You can send an email to IHSIndia@am22tech.com
    I will reply after going through the statement.

  • Ranjith

    Hi Anil, have sent you to required information in mail. When you find some time, please check on it. Thanks again for your time and effort spending for us.