Home Loan with OD

[Finchamp!]

Hi All,

I am looking at Home Loan with OD options (or as many call "Home Saver" accounts) and it appears that almost every bank has one variant of it now. I wanted to know whether are there any specific criteria to be considered/ explored while selecting one Home Saver account over another? Or can I just compare rate of interests and proceed?

On that note, why is SBI maxgain so popular? Does it have any special benefits over its competing products?

 

[ontherocks]

Saver home loans are provided in a minority of banks mot majority, as of today.
As far as comparing between banks, just compare the interest rates like you would do in a regular home loan
One thing to be aware of is that saver home loans have higher interest than regular loans.
SBI is popular because people think they do a better/thorough/strict due diligence on the property.

 

[anujdit]

SBI Maxgain is popular because it is the 1st bank to give OD in home loan.
Other bank ICICI, and Axis says that they have Maxgain but not sure. If you are getting Maxgain then nothing like that. I keep my money in that instead of FDs and get 8.5 interest saving without taxes

 

[ontherocks]

SBI Maxgain is popular because it is the 1st bank to give OD in home loan.
Other bank ICICI, and Axis says that they have Maxgain but not sure. If you are getting Maxgain then nothing like that. I keep my money in that instead of FDs and get 8.5 interest saving without taxes

Its not 8.5% savings. Banks are smarter.
Say you take a home loan for 40L. And say the Home Loan ROI is 10% and FD ROI is 8%. (Home loan ROI is always greater than FD ROI). FD is just as an example to normalize both the scenarios below.
If you take OD based home loan, and keep the entire 40L in OD account, you will save the 10% interest. However since OD doesn't fetch any interest, you will loose 8% interest, plus you loose on the IT deductions on 80c, 24(b), 80EE, 8EEA, etc.
If you take a normal home loan, and keep the entire 40L in FD, you will get 8% interest, you will loose 10%, but also gain via deductions on 80c, 24(b), 80EE, 8EEA, etc.

 

[Zacobite]

Its not 8.5% savings. Banks are smarter.
Say you take a home loan for 40L. And say the Home Loan ROI is 10% and FD ROI is 8%. (Home loan ROI is always greater than FD ROI). FD is just as an example to normalize both the scenarios below.
If you take OD based home loan, and keep the entire 40L in OD account, you will save the 10% interest. However since OD doesn't fetch any interest, you will loose 8% interest, plus you loose on the IT deductions on 80c, 24(b), 80EE, 8EEA, etc.
If you take a normal home loan, and keep the entire 40L in FD, you will get 8% interest, you will loose 10%, but also gain via deductions on 80c, 24(b), 80EE, 8EEA, etc.

u will still get the IT benefits..OD option is for tjose who anticipate high availability of liquidity regularly.. and will be kept in this account.. If u don't have cash flow then OD will. be a loss.. if u have then it saves u a lot.. Remember its straight interest saved Vs FD interest which is taxable..

 

[anujdit]

Its not 8.5% savings. Banks are smarter.
Say you take a home loan for 40L. And say the Home Loan ROI is 10% and FD ROI is 8%. (Home loan ROI is always greater than FD ROI). FD is just as an example to normalize both the scenarios below.
If you take OD based home loan, and keep the entire 40L in OD account, you will save the 10% interest. However since OD doesn't fetch any interest, you will loose 8% interest, plus you loose on the IT deductions on 80c, 24(b), 80EE, 8EEA, etc.
If you take a normal home loan, and keep the entire 40L in FD, you will get 8% interest, you will loose 10%, but also gain via deductions on 80c, 24(b), 80EE, 8EEA, etc.

If I have 40L loan and keep 40L amount in OD account (Which I can do the FD) then I will not pay any home loan interest i.e. 10% interest saving (No income tax on interest too). In addition, SBI provides Interest certification (Prov) too for Income tax return

 

[KGSIPO]

Following the thread

 

[ontherocks]

If I have 40L loan and keep 40L amount in OD account (Which I can do the FD) then I will not pay any home loan interest i.e. 10% interest saving (No income tax on interest too). In addition, SBI provides Interest certification (Prov) too for Income tax return

You will get relief only on 80c, which for most people is already maxed out.

 

[ontherocks]

u will still get the IT benefits..OD option is for tjose who anticipate high availability of liquidity regularly.. and will be kept in this account.. If u don't have cash flow then OD will. be a loss.. if u have then it saves u a lot.. Remember its straight interest saved Vs FD interest which is taxable..

For the example I mentioned, you will get relief only on 80c, which for most people is already maxed out.

 

[varkey]

You will get relief only on 80c, which for most people is already maxed out.

Sure, but try calculating, putting that 40L in the linked account is more beneficial than FD after considering taxes.