[fordday]

Originally Posted by prasathlr

Just curious, are you purposefully prolonging the duration of your loan? Are you still paying the same loan from 2013?

I took the loan in 2012 for 20 years, so it is continuing. Didn't understand what you meant by purposefully prolonging.

Originally Posted by Shrey_1520

I have a Max Gain home loan and I don't think there is any such restriction.

What you said is correct. We can park our money in the overdraft account. It will reduce the monthly interest but it will never decrease the tenure or principal outstanding.

Tenure will be what you selected at the time of taking the loan, and your principal outstanding is what is shown as Drawing Power/ Limit.

I meant prepayment to reduce the tenure and DP.

[prasathlr]

Originally Posted by fordday

I took the loan in 2012 for 20 years, so it is continuing. Didn't understand what you meant by purposefully prolonging.

For your 33.7L loan over 20 years at 9.05% interest rate, if you just keep paying EMI you will end up paying 39L in interest alone. You would pay over 70L in total payment to the bank. So was curious why would you pay 39L in interest alone just by paying EMI?

Now the trick with home loan is to prepay your principal outstanding amount (33.7L). EMI is broken into 2 components: PRINCIPAL and INTEREST. So in your case I assume your EMI to be 30K based on SBI loan calculator, now 8 years post your loan, 20k will go to your Interest component but only 10k to your principal component. So as you see most of the EMI you pay will go to the interest and very little to your principal (33L loan). In your older posts, you had mentioned that after 7 years, your principal was reduced only by 5L. This is reason why your principal reduced so little. That's why some people are shocked when they request their home loan statement and even after paying EMI for 3 years, the principal would have hardly reduced. It is because the banks make sure that they earn the maximum interest possible when the loan is new.

IMO, The best way to pay home loan is to keep prepaying towards the Principal Component rather than paying a huge EMI because in your EMI the biggest chunks goes to interest and while when you prepay the complete chunks goes to your principal and EMI calculation is done based on the Outstanding Principal amount.

Sorry, if you knew all this but I couldn't digest that you are still paying EMI after 8 years. That's a huge toll on your finance.

[fordday]

Originally Posted by prasathlr

It is because the banks make sure that they earn the maximum interest possible when the loan is new.

IMO, The best way to pay home loan is to keep prepaying towards the Principal Component rather than paying a huge EMI because in your EMI the biggest chunks goes to interest and while when you prepay the complete chunks goes to your principal and EMI calculation is done based on the Outstanding Principal amount.

Thank you, you are right and I agree. I know about this huge outgo in interest when we are paying EMIs but then there isn't much option.
Your post will surely be an eye opener for others.

In case you missed, I took a maxgain home loan. In maxgain, I can park the surplus money with the bank which you would have otherwise paid as prepayment.
Monthly interest is calculated on the principal outstanding minus my parked amount. So this is somewhat same as prepaying, as to what you referred.

The advantage here is I can withdraw the parked money any time I need (liquidity).
The disadvantage (obviously) is my parked money does not reduce my principal outstanding and the tenure.

[Shrey_1520]

Originally Posted by fordday

but it will never decrease the tenure or principal outstanding.

principal outstanding is what is shown as Drawing Power/ Limit.

The interest that you pay is not for the Drawing Power. Its for the Book Balance.

If you have online access to your loan account, there you will see something like "Book Balance". So this Book Balance is the difference of the Drawing Power and the Available Balance. The interest is calculated for this Book Balance and not the Drawing Power. Now if, you are not made/making any prepayments, your Book Balance = Drawing Power and Available Balance = 0

So If I keep paying extra every month, the Book Balance reduces and hence the interest. So at a certain point Book Balance(its shown in negative) becomes zero and Available Balance = Drawing Power. So the interest would also reduce to zero.

Even after this, your EMI will keep getting deducted every month which will make Book Balance in positive. This EMI amount can be safely transferred to your savings account. At this point, it can be safely assumed that your Home Loan is repaid in full as you are no longer paying anything to the bank.

[fordday]

Originally Posted by Shrey_1520

The interest that you pay is not for the Drawing Power. Its for the Book Balance.

I think you got me wrong. I never mentioned interest is calculated on DP.

Originally Posted by Shrey_1520

So If I keep paying extra every month, the Book Balance reduces and hence the interest. So at a certain point Book Balance(its shown in negative) becomes zero and Available Balance = Drawing Power.

This is actually the point where you have paid back the entire principal amount. If you have that much extra cash flow it is good to park it there and foreclose the loan. For me I have long way to reach there.

But my immediate concern is EMI moratorium is applied to my account. Even though I have never requested for it. Which means every month the interest is added back to the DP and principal deduction is not happening, even when I am paying my EMI regularly. My DP is regularly increasing every month.

So I am now paying interest on interest.

[bhushan08]

Originally Posted by fordday

But my immediate concern is EMI moratorium is applied to my account. Even though I have never requested for it. Which means every month the interest is added back to the DP and principal deduction is not happening, even when I am paying my EMI regularly. My DP is regularly increasing every month.

So I am now paying interest on interest.

Exact same issue in my account. The DP is going up by interest amount each month to the point that now my DP is more than the loan sanctioned. Sent multiple email to branch. Clueless. Spoke to RACPC guy, who said same problem in each account and ignore DP

I've excess funds parked in the account. If I do (Loan Sanctioned - Excess Funds deposited - Interest saved from EMI due to excess funds - principle paid) then I get to the amount that matches my Book Balance. Book balance is the amount that I need to pay if I want to close my loan today.

Thus, I am assuming the overall maths is right and DP can be ignored until SBI figures out this mess. It will be great to know if this approach is right.

Note: I have my amortisation schedule doc and I use it to calculate:
Principle paid => basis amortisation schedule
Interest Saved from EMI as (Total EMI paid - Actual Interest deducted per the account statement - Principle paid as per amortisation schedule). In normal course this money would have gone into available balance and might be but I can't really tally and no one is sure in the SBI team

[Shrey_1520]

Hi,

I found this calculator to be pretty accurate for anyone who needs an amortisation schedule. You can enter the HL details and you get a nice visualisations with charts, graphs and payment schedule with a break up of how much goes to Interest and Principle. Another good part is if you are making regular or one time prepayments, it also calculates the amount/tenure you would save.

https://emicalculator.net/home-loan-emi-calculator/

[Oxy]

SBI launches loan restructuring portal. Basically if you have had a significant salary cut or have been laid off, this might be useful. Home, Auto and Personal loans covered. Check your eligibility here:

https://digivoucher.sbi.co.in/EMIRes...tomerLogin.jsp

[fordday]

Originally Posted by bhushan08

Thus, I am assuming the overall maths is right and DP can be ignored until SBI figures out this mess. It will be great to know if this approach is right.

I have tracked and checked my maxgain account thoroughly in September. SBI is adding back the interest to DP and not deducting the principal amount from DP as per amortization schedule, every month.

And they calculate interest on Book Balance which is DP - Available balance, which is normal process.

So we cannot ignore DP. So obviously we are paying Interest on interest.

Originally Posted by bhushan08

Note: I have my amortisation schedule doc and I use it to calculate:

no one is sure in the SBI team

Where did you get your amortization schedule?

[bhushan08]

Originally Posted by fordday

I have tracked and checked my maxgain account thoroughly in September. SBI is adding back the interest to DP and not deducting the principal amount from DP as per amortization schedule, every month.

And they calculate interest on Book Balance which is DP - Available balance, which is normal process.

So we cannot ignore DP. So obviously we are paying Interest on interest.




Where did you get your amortization schedule?

I received it from the SBI branch. Just ask them and they will email you.

The interest is indeed calculated on (DP - Available) i.e. book balance. However, If I do the rough maths of the interest charged (7.2%) on the book balance to get daily interest, it matches with the amount debited actually under interest to <1% deviation on positive side i.e. debit is less than my math will suggest. So I don't think interest on interest is being charged. The fundamental check is that the Book balance should reflect the amount you need to pay in order to close your loan on a given day. And this amount of book balance adds up as I mentioned on my previous post

[mankuthimma]

Need some info from people who have taken HL for self construction purposes -

I had taken home loan for construction of our independent house. It is not an apartment. So the amount of process and procedures to follow for getting installment amount released at every stage of construction is different and *challenging* ! I didnt fully utilize the sanctioned amount, partly due to this tiresome process. Somehow I was able to manage own funds and completed the construction of the house. My questions are

1. Is there a need to tell SBI that I no longer need funds from the bank, i.e., full disbursement is done with whatever amount released so far ? I am anyway paying full EMI from day 1. What is the process to follow - engineer report, anything from BBMP etc are needed to tell RACPC that construction is completed?

2. I want to start making use of maxgain OD account to park excess funds. I was told that full access to maxgain OD account will be enabled after full disbursement , till that time I can only deposit, but not withdraw. I may have to visit the bank branch for this instead of RACPC. What is the procedure to follow here ? do they need any acknowledgement for RACPC before enabling full access ? I am trying to see if there is any simple way to get this done because I dont want to get stuck in RACPC's process and procedures again ?

[fordday]

Originally Posted by mankuthimma

1. Is there a need to tell SBI that I no longer need funds from the bank, i.e., full disbursement is done with whatever amount released so far ? I am anyway paying full EMI from day 1. What is the process to follow - engineer report, anything from BBMP etc are needed to tell RACPC that construction is completed?

This is interesting. I think Engineer report is enough to confirm that construction is completed. But if you do not want to to take the balance amount of loan money, you will need to restructure the whole loan. Not sure if it is a straightforward process. Let us know if you have already done it by now.

Originally Posted by mankuthimma

2. I want to start making use of maxgain OD account to park excess funds. I was told that full access to maxgain OD account will be enabled after full disbursement , till that time I can only deposit, but not withdraw.

I am trying to see if there is any simple way to get this done because I dont want to get stuck in RACPC's process and procedures again ?

This is correct. Until they disburse the full amount you cannot withdraw from your maxgain OD account.

Unfortunately there is no easy process. RACPC visits are required. Everytime I go to RACPC I see queue of people for submitting grievances.

[jkrishnakj]

Is there anyone who has an experience of closing out the Maxgain Home loan account with SBI?

I had to visit my home branch twice for this and I now have an NOC document addressed by the home branch to the RACPC branch.

I don’t know if I might have to visit RACPC multiple times to collect my original home documents or if that’s a quick process. The commute is high for me and I was unsuccessful in my attempts to contact anyone at RACPC office at Koramangala.

I’m mentally preparing myself to visit the offices at least twice towards this.

What I also understand is that after we collect documents, there is an additional step to visit the registration office to remove the Hypothecation.

Compared to all such running around, my home loan closure with HDFC was such a breeze.

[Oxy]

I am in the same boat. Have closed the loan but have not got a chance to collect my house documents from the RACPC. The idea of travelling to the sub registrar office to get the hypothecation removed sounds like a massive hassle.

[BulZire]

I enquired about loan closure process in my home branch last month. what I understood is it is a simple process once get the NOC and multiple visits to RACPC is not required. They did not mention about Hypothecation removal and all. I will check again anyway.