POSTED BY September 20, 2012 10:55 am COMMENTS (16)

ONHi,

I am having a simple question:

If by mistake, the EMI is wrongly calculated by bank and deduction is happening at higher side, whether the customer can have any benefit as he will be paying higher EMI ? Because many a times I have seen people suggesting to have a higher EMI to get the loan closed early etc.

What should be EMI of a SBI Maxgain scheme for amount of Rs.28 Lacs for 20 years at 11%? Are there any additional charges for SBI Maxgain scheme ?

Dear Ashal,

Thanks for both your replies.

It’s very clear to me now. No confusion. I will do as advised by you.

Cheers!

Prashant

Dear Ashal,

I had sent email to RACPC. After 10 days & 3 reminders and telephone calls, finally i got following information. 🙂

1) My present ROI is 10.25 (9.75 base rate + 0.50 spread)

2) If my EMI is extra also (which is presently extra only), i will get benefit as the outstanding is reduced and i will pay less interest

3) If i pay 0.56% of the outstanding as conversion fee & convert to present spread, I will get ROI of 9.75% (which is current base rate). I need to calculate whether it’s worth it (Paying approx.11,000/- which is 0.56% of 22 Lacs of outstanding amount) ? The SBI guy suggest it’s not worth it.

What’s your view on this. Should i get converted to present spread ?

I guess i will get ROI of 9.75% if I convert.

One more thing. the SBI guy told me that I can get information about pending EMIs only verbally and not as a record. Is that true ?

Dear Prashant, please continue with more than normal EMI, the extra money ‘ll be adjusted automatically towards loan & thus your loan ‘ll come down early & you can repay early.

Whenever you ‘ll demand, bank ‘ll provide, the loan amortization schedule or any other info in written. RBI rules are there to protect you.

Thanks

Ashal

Dear Ashal,

As per your suggession, I tried to again see my present ROI which is shown as 10.25 in the online SBI account. I am unable to understand how this is possible. Because as per our calculation it should be 10.75%.

++++++++ please see this +++++++++++

Now from 20th Sept 2012 onwards SBI has reduced it base rate from 10 to 9.75%. So in your case, your normal running ROI ‘ll be 10.75% (11-0.25) which you can bring down to 10%(9.75+0.25) by paying that conversion fee

++++++++++++++++++++++++++++++++++++++

I was just wondering if my interest rate is already shown as 10.25%, is there any point in paying the 1% conversion fee ?

Also, as the interest is reduced, whether my no. of EMIs will come down ? Because EMI amount remains same i.e. Rs.29.102/-

Where I can check whether my home loan duration has been reduced ? It doesn’t show anywhere in the online account.

Dear Prashant, please contact local RACPC to get a clarity on this ROI issue. Yes the no. of EMI ‘ll be reduced automatically but to get the exact info on this reduction of no. of EMI, again only RACPC people can provide you written info.

Thanks

Ashal

Dear Ansal,

So, My question now is:

Is it worth to go for conversion to current spread of 0.25% instead of my spread of 0.50% by paying approximately Rs.12,000/- which is 0.56% of my outstanding amount of 22L ?

I can see that there will be difference of Rs.400/- in EMI if I opt for current rate.

My present ROI is 10.25% whereas current effective ROI is 10% (9.75 + 0.25%)

Please reply sothat I can take next steps.

Thanks in Advance.

Please read “Dear Ansal” as “Dear Ashal”.

Sorry for the typo.

Dear Prashant, please do not opt for current spread & let your ROI remain @ 10.25%. Instead of reducing your ROI for that negligible 0.25%, please park that 12K Rs. of conversion fee into Max Gain account. At the same time, try to park more & more money into Max Gain to bring down interest outgo.

As your loan is linked with base rate, each point reduction in base rate from here onwards, ‘ll save you more & more money.

Thanks

Ashal

Thanks Ashal,

This clears everything. I will check with SBI about this.

Have a nice time. 🙂

Dear Prashant, please feel free to ask if you need so.

Thanks

Ashal

Dear Prashant, here is the answer for your query.

The standard EMI for the given parameters is 28901.27 Rs. or you may round it to 28902 Rs. Now n case your EMI is say 30000 Rs. which is some 1800 Rs. more, the Loan ‘ll be over in 213 months instead of 240 months. That’s because of the higher than normal repayment in your EMI.

In my personal opinion, please contact SBI immediately for rate reduction. After paying 1% conversion fee + service tax there on, you ‘ll get the interest rate reduced to 10%. Now keeping the same EMI of 30K in our example, the loan ‘ll be over in 182 months.

No there are not any additional charges.

Thanks

Ashal

Thanks Ashal for your reply.

Actually, my Home Loan Arragement Letter mentions that “Interest on the loan will be charged at .75% p.a. above Base Rate which is currently 10% p.a.” This was on 13/7/2011 wherein they have also given me concession of 0.25%. So, the effective rate came to 10.75 – 0.25 = 10.5% that time. The EMI mentioned in this document is Rs. 28,641/- for 240 months. The first EMI was started somewhere around Oct.2011 wherein the rates were already changed to upwards & they calculated the EMI of Rs.29,102/- & started deduction by ECS given. Please note that my house is under construction and I have myself requested them to start EMI instead of Pre-EMI. Now, I wonder what exactly is the rate at which this EMI of Rs.29,102/- is calculated for a loan of 28 Lacs for 20 years? Whether I am at loss presently ? Also, whether the today’s base rate reduction by 0.25 will automatically get reflected in my EMI ?

Dear Prashant, please cross check with SBI for your actual interest rate. From the info provided by you, the EMI of 29102 is calculated on 11% ROI. Now after the reduction in Base rate by 0.25% ROI, your effective ROI should be 10.75%. Yes you can bring it down by paying a conversion fee of 1% + service tax to the new rate of 10% (base rate +0.25% spread).

In this case, your EMI ‘ll remain same but the loan term ‘ll come down.

Thanks

Ashal

Thanks ashal.

But what is this 1% conversion fee ? Nowhere my arrangement letter mentions that i have to pay it for getting the current base rate. Does this means in floating rate also, there will not be automatic change in EMI/Loan Period whenever there is a change in the base rate ?

Dear Prashant, the conversion you are paying is meant for getting the lower spread from base rate.

Your current spread is 1% that’s why the ROI for you is 10+1=11%.

Now after paying the conversion fee, the spread ‘ll come down from 1% to 0.25% & thus your effective ROI ‘ll be 10+0.25% = 10.25%.

Now from 20th Sept 2012 onwards SBI has reduced it base rate from 10 to 9.75%. So in your case, your normal running ROI ‘ll be 10.75% (11-0.25) which you can bring down to 10%(9.75+0.25) by paying that conversion fee.

Thanks

Ashal