[Draunzer21]

I had a home loan from HDFC few years ago, when I used to do pre payment, they used to give me an option to reduce emi or to reduce tenure which I found logical.

Recently I have taken second home loan with SBI and whenever pre payment happens, they do not reduce tenure or emi, they are just reducing principal which I think is incorrect. Am I thinking something wrong here? Can someone please help? I am thinking of moving my loan to HDFC as I do pre payment often.

[rx100]

Originally Posted by Draunzer21

I had a home loan from HDFC few years ago, when I used to do pre payment, they used to give me an option to reduce emi or to reduce tenure which I found logical.

Recently I have taken second home loan with SBI and whenever pre payment happens, they do not reduce tenure or emi, they are just reducing principal which I think is incorrect. Am I thinking something wrong here? Can someone please help? I am thinking of moving my loan to HDFC as I do pre payment often.

Both are doing same thing, all the prepayment will end up in a reduction in principal amount. In case of SBI, if you continue with same EMI after prepayment, you will end up with a reduced tenure.

[Pequod]

Originally Posted by Draunzer21

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Recently I have taken second home loan with SBI and whenever pre payment happens, they do not reduce tenure or emi, they are just reducing principal which I think is incorrect. Am I thinking something wrong here? Can someone please help? I am thinking of moving my loan to HDFC as I do pre payment often.

It is but natural that any payment made over and above your monthly EMI be adjusted against principal outstanding. As regarding tenure or EMI change option, many PSB’s necessarily do not effect such a change in the repayment schedule.

Part payment and resultant reduction of principal outstanding will naturally result in the loan getting amortised/repaid over a shorter tenor. Just check the statement of your loan account - your monthly interest outgo will be reduced after each part payment.

If you wish to reduce EMI, you shall have to take up with the bank. Not advisable though, as you will end up paying more interest over the remaining tenor of loan.

[m8002?]

Originally Posted by Draunzer21

Recently I have taken second home loan with SBI and whenever pre payment happens, they do not reduce tenure or emi, they are just reducing principal which I think is incorrect. Am I thinking something wrong here? Can someone please help? I am thinking of moving my loan to HDFC as I do pre payment often.

In most banks, the default is to reduce the tenure keeping the emi fixed. Check with the bank and confirm - quite sure the number of remaining months should have reduced. Only other option is that the prepayment amount is very small and the interest rate has increased at the time of prepayment.

[shipnil]

Originally Posted by Draunzer21

SBI and whenever pre payment happens, they do not reduce tenure or emi, they are just reducing principal which I think is incorrect.

What type of the loan is there in SBI? Is it Maxgain HL account? if Maxgain then it is treated as a current account and it is always the loan outstanding amount that gets reduced without change in the EMI or the tenure. With principal getting reduced, anyway the interest amount will also reduce in each EMI.

I don't think you should take the loan transfer decision in haste. First check with SBI and then only decide.

[Draunzer21]

Originally Posted by m8002?

In most banks, the default is to reduce the tenure keeping the emi fixed. Check with the bank and confirm.

I confirmed with SBI. They reduced principal but not tenure or EMI. I wanted to reduce tenure only. The tenure is visible on the YONO app as well and the tenure did not reduce whenever I did pre payment. Pre payment amount was almost 5 times or more of the current EMI all the time.

[Draunzer21]

Originally Posted by Pequod

Part payment and resultant reduction of principal outstanding will naturally result in the loan getting amortised/repaid over a shorter tenor.

I understand the principal outstanding would change but should the tenure not change?
Principal outstanding : 30 lacs over 218 months for 8.50 % ROI
Vs.
Principal outstanding : 30 lacs over 210 months for 8.50 % ROI

The outflow of interest would be different in both the cases, right?
The calculation looks correct to me on my side but I still want someone more experienced with SBI home loan to tell me this. SBI people are not able to explain why tenure is not reducing.
My loan is not Maxgain so this would be treated as normal loan only

[Pequod]

Originally Posted by Draunzer21

I understand the principal outstanding would change but should the tenure not change?

The outflow of interest would be different in both the cases, right?
The calculation looks correct to me on my side but I still want someone more experienced with SBI home loan to tell me this. SBI people are not able to explain why tenure is not reducing.
My loan is not Maxgain so this would be treated as normal loan only

Just to get clarity, how have you arrived at the conclusion that tenure is not being reduced? Have you got any statement (online/offline) or such confirming the outstanding balance and residual tenor, after your last part payment?

[m8002?]

Originally Posted by Draunzer21

I confirmed with SBI. They reduced principal but not tenure or EMI. I wanted to reduce tenure only. The tenure is visible on the YONO app as well and the tenure did not reduce whenever I did pre payment. Pre payment amount was almost 5 times or more of the current EMI all the time.

One other option I can think of is that the interest rate has increased exactly in the month you did the pre-payment. That would have offset the decrease in tenure.

[Draunzer21]

Originally Posted by Pequod

Just to get clarity, how have you arrived at the conclusion that tenure is not being reduced? Have you got any statement (online/offline) or such confirming the outstanding balance and residual tenor, after your last part payment?

It is visible on the YONO app and yes home loan statement also says the same tenure. Nothing reduced.

[rx100]

Originally Posted by Draunzer21

I confirmed with SBI. They reduced principal but not tenure or EMI. I wanted to reduce tenure only. The tenure is visible on the YONO app as well and the tenure did not reduce whenever I did pre payment. Pre payment amount was almost 5 times or more of the current EMI all the time.

If your EMI and interest rate remains same after the pre payment, the loan would be closed sooner than the original tenure as the interest outflow will be reduced in your EMI.

[huntrz]

Originally Posted by Draunzer21

I understand the principal outstanding would change but should the tenure not change?
Principal outstanding : 30 lacs over 218 months for 8.50 % ROI
Vs.
Principal outstanding : 30 lacs over 210 months for 8.50 % ROI

The outflow of interest would be different in both the cases, right?
The calculation looks correct to me on my side but I still want someone more experienced with SBI home loan to tell me this. SBI people are not able to explain why tenure is not reducing.
My loan is not Maxgain so this would be treated as normal loan only

In the begining of the month they will charge the interest on the outstanding. The outstanding is not based on the amortization schedule but on actual outstanding principal. So if you prepay anything the actual outstanding will reduce and thereby your interest charged will reduce. Subsequently larger amount of money will go towards principal from the emi. Effectively your tenure will automatically reduce. Ignore the number of months it shows. Thats based on the ECS. Whenever your outstanding is closer to your desired amount go to the branch and make the final prepayment and close the loan.

[neofromcapone]

Please use an early home loan payoff calculator
I found this one online

[Comrade]

Originally Posted by Draunzer21

It is visible on the YONO app and yes home loan statement also says the same tenure. Nothing reduced.

Just ask for a revised amortization schedule from the bank manager that reflects the part-payment or pre-payment.

To my knowledge, home loans are RBI-regulated, and SBI does not have a say on the remaining tenure for home loans with floating interest rates.

For home loans with floating interest rates, remaining tenure purely depends on your current principal-outstanding, your current interest rate and your current EMI, and keeps getting adjusted every month if any of the above three parameters change for whatever reason.

Imagine this way. Out of 30L principal outstanding in your example, if you prepay 29L tomorrow morning, are you going to continue to pay your EMI every month for 218 months on your remaining 1L loan? Assuming EMI of 27500, SBI would be charging almost 59L interest on just 1L loan!!! Thats not how it works, SBI or not.

[Vtach]

Gents

Is there a relief for the customer wrt the *LEGALISED FRAUD* of "pre-EMI" during Covid 19 pandemic?

I'd booked an underconstruction flat with a 30L HDFC home loan in July 2019, 96 installments of Rs.40876/- floating rate. The loan was to be disbursed in tranches as per construction progress with a promised handing over by Jan 21. The EMI was to start after the loan was fully disbursed; the last tranche scheduled to be disbursed at the time of handing over. Pretty standard stuff so far I guess.

Enter Covid. The builder sought refuge in "Act of God" post haste and ceased construction; not that they needed any encouragement to do so the thugs they are.
Anyhow, HDFC continued to extract the "Pre-EMI" stating the loan hadn't been fully disbursed as there was no construction progress. That this (Covid)was an exceptional black swan event not withstanding.

HDFC finally relented to EMI finally being started (without the final tranche being disbursed) in Oct 22, they had already extracted ~6.2 L interrest out of the originally commited to ~9.2 L by then.
Have paid Rs 8,58,396/- as EMI till date as well, & HDFC says 81 more EMI's are due.

Effectively, HDFC has unilaterally increased my loan tenure on account of an "Act of God" neatly(& just accidentally) lining their own pockets in the process. The builder gets off scot free, what does the customer get?

HDFC has been totally no committal on any releif (reduction in rate/EMI/tenure) whatsoever, stating it's how it is.

Has anyone else faced a similar situation? What recourse do I have?
All I could find was a govt directive on temporary suspension of "EMI's" for 3 odd months but nothing on "Pre-EMI's" hence requesting learned members for their opinion.

Would really appreciate any inputs here..thanks!