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POSTED BY ON September 20, 2012 8:25 pm COMMENTS (31)
Hi,
I have got a Normal Housing loan from SBI before 2 year.Now I wish to change my loan to SBI Maxgain.Is it possible?If yes, what Step I need to take for that?
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Hi Ashal,
Await your expert advise regarding my queries above!! Sorry for chasing…
Also, is it possible to get the EMI amount reduced by requesting the bank if you pre-pay under Mas gain…
Thanks a lot,
Ashutosh
Hi Ashal,
Just to add: I have a SB account at my hometown which i don’t use much, however the Max gain will be in another City where I currently work. Also, my salary account is in another bank. What do you suggest will be the best out of following:
a) Opening a Max gain OD account in my city of work and opening another account in the same branch.
b) Linking my home town saving account (I opened it for PPF) to my OD account in the city and keep transferring the surplus from my saving account in another bank.
c) Is there any disadvantage if i don’t open a saving account in SB and just open a Max gain OD. I can keep transferring funds from my salary account in another bank to my loan account. Is it easy to manage?
Pl. let me know whichever you think is the best and clean option….
Thanks Ashal for your valuable comments. They will certainly be very helpful for a ignorant investor like me. I have some confusion regarding max gain as follows:
1. The capital amount will reduce only as in normal loan and you can’t repay it as easily as in normal loan. That means my loan term and capital will not reduce in max gain. I am a bit confused, how the prepay works in normal loan, does it reduce your payment term with constant emi? I may sell my other property investment in couple of years and would like to pay up to 30 to 35 percent of my loan amount. Which one works better in this situation out of two plans?
2. If i have a surplus equal to loan amount, how will max gain interest work? Will it be zero for the time frame i maintain that surplus.
3. What’s the best way to use maxgain? By keeping maximum of your saving accounts amount in OD account? Does it provide better benefit than interest by FDs? A simple comparison considering 10.15% loan interest should be helpful.
Pl. Consider my queries at par with layman while answering…thanks a ton..looking forward for
your expert suggestions!
Thanks,
Ashutosh
Hi Ashal,
It is very interesting to go through a very untouched concept (for me) related to Maxgain. I am going to finalise my Loan and need your help in this, following are my basic questions to you:
a) which one is better in terms of overall cost benefit- Max gain or Classic Home loan? – Considering a person who can save and prepay couple of lacs every year to reduce the loan burden. Prepayment is very easy in normal loan as compared to Max gain?? It seems better to prepay and reduce the capital under loan, however in Max gain it will happen at it’s own pace.
b) I will be buying a resale property (project under construction), so just wanted to know the basis which SBI will consider to arrive at property value for offering the loan. The seller may have bought the property at a very low rate in direct booking and may like to get the difference between current market price and booking price as cash. What will SBI consider to offer me loan for an under construction propety..market value, Agreement to sale or seller’s original booking price.
Dear Ashutosh, what do you mean by classical home loan? Do you mean normal home loan? I assume so.
Here are my answers for your queries.
A. If one has the ability to generate surplus, years after years, Max Gain is certainly better than normal home loan as one has the liquidity of this surplus amount in MG home loan which is not available in a classic home loan.
B. Well only SBI people can answer this question based upon the actual deal values between you & your seller.
Thanks
Ashal
Thanks Ashal…Your response makes it very clear..
Dear Ashal ji,
Please confirm whether my knowledge about maxgain is correct or not
1.In maxgain , there will be an OD account were we can part our extra earnings
2.During interest calulation on monthly EMI, bank will deduct it as “interst on (Principal-Amount available in OD).
3.EMI Consst of 2 part.Interest and Principal.Normally the interest portion will be high.I am paying an EMI of Rs.8200 in that Rs.6500 is interest .If I have deposited a high amount in OD,then my EMI remaind constant but principal portion of EMI will go high.
Regards,
M.S RAJESH
Dear Rajesh, here are answers for your queries.
1.In maxgain , there will be an OD account were we can part our extra earnings
Yes, you can park your surplus amount & can withdraw also as & when you need so.
2.During interest calulation on monthly EMI, bank will deduct it as “interst on (Principal-Amount available in OD).
Yes, the actual interest debited from your MG account ‘ll be the interest calculated on this difference amount.
3.EMI Consst of 2 part.Interest and Principal.Normally the interest portion will be high.I am paying an EMI of Rs.8200 in that Rs.6500 is interest .If I have deposited a high amount in OD,then my EMI remaind constant but principal portion of EMI will go high.
NO, in case of MG, the calculated interest ‘ll be lower for example I is the EMI interest & I1 is the calculated interest. In this case, I1 ‘ll be debited from the MG account & I – I1 amount ‘ll remain surplus in your MG account & it ‘ll help again to bring down the interest of next month & months after months.
Thanks
Ashal
Thanks Ashal for your patience in responding so many queries on this product which is bit complex to understand but provided good financial gains to people availing home loans.
Just to simplify I am comparing loan without Maxgain and one with Maxgain after 1 month of transaction in both accounts.
Loan Amt: 50L
EMI:50k
Interest: ~39K
Principal:~11k
Loan Balance:50L less ~11k
Max Gain Acct
Loan Amt: 50L
EMI:50k
Additional Parked Sum in OD: 20L
Interest On Loan Balance (i.e.30L): ~29k
Regular Principal:11k
Loan Balance:50L less 11k
Amount Available for Withdraw from OD at the end of the month.: 20L plus 10k (=50k-29k-11k)
Is it correct understanding on how MaxGain works?
Thanks
abc_xyz
Dear ABC_XYZ, yes your understanding is correct.
Thanks
Ashal
Thanks for quick response.
In above case, if I withdraw 20L plus 10k amount to my Savings account after one month, will it be considered as interest earned and will be liable for tax? It will be interesting to know if anyone has already done this on how this additional income is reported by bank. Is it simply balance transfer from one account to other account?
abc_xyz
Dear ABC_XYZ, no the withdraw amount of 20.1L Rs. as per above example is your own capital & this is not your income in any sense.
So the question of taxation does not arise.
Thanks
Ashal
@ashal jauhari,
if the figures by ‘ ABC_XYZ ‘ are real,or near to real, it means your saving deposited in OD a/c. earned @6%p.a instead of normal saving bank interest of 4% without sacrificing the liquidity and that is good for deploying savings of temporary nature. is it better to deploy extra funds of permanent nature to loan a/c itself for reducing no.of EMI or reducing a/m of EMI?
Dear Bharat Shah, neither the EMI amount ‘ll change nor the EMI tenure. Only thing ‘ll change is the actual interest charged from you in this Max Gain account. Yes it’s advisable to keep even short term nature money in MG account to save on interest.
Thanks
Ashal
Ashal,
Thaks for the response.
-Sanmuga
Ashal,
I need further clarification on Q3. After 20 years hom much we need to spent to clear that mortgage or changing property into our name ?
3.After 20years loan completed means how we can transfer the property to our name ? how much charges we need to spend at that time ?
Regards,
Sanmuga
Dear Sanmuga, the property was, is & ‘ll remain under your name. Here in case of Mortgage, there is merely an added entry of loan & thus mortgage on your property. This mortgage ‘ll be released any time you are able to procure SBI’s no due certificate & loan closure certificate & request for mortgage cancellation. At that time, only an advocate’s fee ‘ll be paid by you for this mortgage cancellation. Nothing else.
Thanks
Ashal
Ashal,
Thanks for your answers.what are the term cover policy in SBI ?Please let us know about the scheme names .
-Regards
Sanmuga
Dear Sanmuga, Smart Shield is the Term Cover from SBI Life Ins. Co.
Thanks
Ashal
Hi Ashal,
we are planning to take housing loan on SBI maxgain.Project is land purchase and construction of villa with in 1 year.Land cost 24L and Construction cost 35L.We approach sbi,they are telling 2 separate loan is the only way.So first we are applying HL1 for Land (80% of total ) 18L this month.
Once it sanctioned again we need apply the HL2 for 23L (80% of construction as per sbi valuation).Once 2 loan sanctioned we need to do mortgage for (0.5 % of total loan amount like 18+ 23= 41 L) 20,500 stamp paper along with registeration charge 6000.
This is the scenario explained by the bank staff.
My queries :
1. will we get any benifit of apply 2 loans instead of single ?
as per mine due to twlo loans and it amount is less than 30 L.we can get less interest rate 10% current rate for total 41L.But disadvantage is 2 times processing valuation and other fees.
any other disadvantages due to this 2 loan process ?
2. is that mandatory to register that mortgage document ?
in other bank like hdfc there is no registeration for mortgage right.
3.After 20years loan completed means how we can transfer the property to our name ? how much charges we need to spend at that time ?
(people telling ,once we register the mortgage ,The EC will changed to “SBI Common property” from our name )
4.Along with Maxgain,SBI Life Rinn Raksha policy is having any benefits ? or we
can go for any other home loan policies ?
Dear Sanmuga, I’m trying to answer your queries.
1. will we get any benefit of apply 2 loans instead of single ?
It’s not about your benefit but the working process of SBI for providing loans for plot & construction there on.
as per mine due to twlo loans and it amount is less than 30 L.we can get less interest rate 10% current rate for total 41L.But disadvantage is 2 times processing valuation and other fees.
any other disadvantages due to this 2 loan process ?
The cost involved as you already mentioned is the disadvantage. Still I w’d like you to visit local RACPC office to check such dual loan system.
2. is that mandatory to register that mortgage document ?
Yes is the answer.
in other bank like hdfc there is no registeration for mortgage right.
3.After 20years loan completed means how we can transfer the property to our name ? how much charges we need to spend at that time ?
(people telling ,once we register the mortgage ,The EC will changed to “SBI Common property” from our name )
Well people do not know what’s the meaning of mortgage & how it works. Mortgage means in govt record, your property ‘ll be marked as mortgage with SBI & till the time SBI is not releasing an NOC for loan completion & cancellation of Mortgage, the same ‘ll remain marked there. So you can not sell your property with out SBI’s NOC in between. Actually it’s a safety feature for you also. Nobody can sell under a forgery this property without your knowledge.
4.Along with Maxgain,SBI Life Rinn Raksha policy is having any benefits ? or we
can go for any other home loan policies ?
Instead of home loan term cover, I w’d like you to purchase a normal Term cover.
Thanks
Ashal
My hosins loan was “SBI Special Home loan”which is having Fixed interest rate of 9.25 for 5 years and then it is floating.I have started paying emi for the last two years interest@9.25 and I have three more years remaining with this benefit.
Now my question is that “Shifing to maxgain which is having a current interest rate of 10-10.25% is feasible or not?”
Dear Rajesh, when you are already getting the benefit of lower ROI, why do you want to change it to a higher ROI? Please explain.
Thanks
Ashal
Dear Ashal ji,
What I felt that, if I deposit my Monthly Salary and Savings to the OD Account then my principal will diminish easily, also I can with draw the amount when ever a crisis comes.
In current loan, I can deposit more money to principal but withdrawing is not possible.Please advice.
Regards,
Rajesh
Dear Rajesh, I think you are misunderstanding Max Gain, if you are keeping money in Max Gain, only the interest outgo ‘ll be lower & not the principal amount. The principal amount ‘ll come down as per usual loan amortization schedule.
Please update with your views.
Thanks
Ashal
Ashal,
Wouldn’t Principal paid every month will vary based on the extra amount deposited in Max Gain Account. Reason is, EMI being constant, there will be reduced interest because of extra amount deposited in maxgain a/c and hence principal paid will be more than regular amortization schedule. And net result will be reduced tenure than the regular tenure. Isn’t it?
Apologies if I understood your response differently.
Thanks
abc_xyz
Dear ABC_XYZ, I think you are misundertaing the Max Gain product. The extra amount parked by you in MG is free money & you can withdraw it any time. Yes till the time you are keeping it in MG account, it’s treated as loan repayment for the purpose of interest calculation. EMI has 2 components P (Principal) & I (Interest).
Now when EMI is credited into MG account from othr SB account, P is adjusted on the very same day against the outstanding loan amount. But this I part remain as it is in MG account till the very last day of the month. Now on last day, due that extra amount, the calculated interest is I1 not I.
Hence I1 ‘ll be debited from your MG account & I – I1 ‘ll remain as surplus in your MG account.
The actual loan ‘ll reduce only from your regular EMIs. If you want to reduce your loan amount faster, you have the option to increase your EMI amount.
Thanks
Ashal
Hi Rajesh,
Its very much possible, I have done the same. To me also they said no when I visited the branch but when i visited the RACPC they said yes, its possible and its a pretty simple process too.
Thanks,
Sandeep
Dear Ashal ji,
I have contacted RACPC .But what they told “Your loan is finalised before 2 year and now you have started paying the EMI.So changing is not possible”.Is this correct?Kindly advice..
Thanks,
Rajesh
Dear rajesh, first of all please check with local Cust. Care in your city for this change (actually you may demand from SBI RACPC to show the circular for not allowing conversion from Term to Max Gain). Alternatively, you may write your problem to following.
Deputy General Manager (Customer Service),
Customer Service Dept, State Bank of India;
State Bank Bhawan, 4th floor;
Madame Cama Road,
Mumbai-400 021,
Telephone No. (022) 22029456 , 22029451 22740432, 22740431,22740433
Fax no. (022) 22742431.
e-mail address – dgm.customer@sbi.co.in.
Thanks
Ashal
Dear Rajesh, please contact the branch of SBI from where you had applied & availed your original home loan. Yes this change is possible.
Thanks
Ashal