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POSTED BY ON September 27, 2012 11:36 am ONE COMMENT
Dear at,
I have taken home loan of Rs. 44 lacs from HDFC in March’09 and at present principle balance is ~33 lacs and present interest rate of 10.75%. I heard of SBI maxGain benefit and like to tansfer home loan from HDFC to SBI MaxGain. I have two questions.
1. Is it good idea to first reduce the present balance amount from ~33 lacs to below 30 lacs (by doing prepayment) to get benefit of tax interest (I heard above 30 lacs interest rate is 10.25 while below 30 lacs is 10%).
2. If I transfer my 33 lacs now and when principle goes below 30 lacs (after say 10-12months)..can interest rate will automatically reduceto 10%.
3. As my all property documents with HDFC…how can I proceed with SBI.
Regards
Dinesh
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It is always advisable to switch to a “lower ” interest rate loan – however, you should check with both HDFC and SBI. Each or either of them could have “hidden” charges which could change the maths of your intended switch.
Also, check the fine print on SBI maxGain,, how and when will interest rates change in the future – shouldn’t happen that a short term immediate benefit becomes a long term issue.
Here is a different take on this whole issue of transferring the loan. A defined purpose, ammortising loan for a finite term as is the HDFC loan in your case and an “overdraft facility” as you propose to take from SBI are different propositions. If you are, and I would presume you are, a financially disciplined individual, then you will pay back the loan in a steady manner, then its good,, but if the overdraft product “tempts ” you to draw funds for purposes other than housing, just because its available, then you are treading on dangerous areas. Be disciplined, pay back the SBI overdraft, don’t use it for any other purpose, check the fine print and you are ready to switch!