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Home Loan against OD account

CcMaverick

TF Buzz
I am exploring for balance transfer of HL from HDFC (8.2%) to a OD linked HL with SBI/BOB/BOI/Others.
Most of the banks have a higher rate. BOB offers 8.4 and BOI offers 8.35 (8.15 with cibil > 825, mine is 805).
Plus there are processing charges & stamp duty etc. which comes to ~40K.

BOB said, they offered it at 8.2 till 31st March but they have increased in new FY.
I had following questions:
  1. Should I go for Balance transfer in first place? Are there any hidden clauses? I can move my emergency fund/FDs to OD and on paper it looks very good.
  2. Will the banks bring down the rate in later months? Like BOB said they offered 8.2 till 31st March perhaps due to FY end.
  3. Even if I go with any of banks with a said rate of 8.4, do they increase/decrease in accordance with RBI repo rates? I see people bashing HDFC, but after merger of HDFC and HDFC bank, they seem to follow RBI guidelines wrt rates. My fear is they offer me 8.4 and then increase it in few months.
  4. If i go with 8.4, would i be able to negotiate a better rate in later months? I did that with HDFC few years back but that time they were not repo linked with RBI.
Thanks!
 
Solution
two points:

1. Ur current bank is private bank
2. Ur listed banks are psu

And ur current interest rate 8.2% is "one of the best" interest rate currently

Keep in mind them for below points

1. Regular home loan "always" have lesser interest than OD linked home loan.
2. Increase or decrease is always based on ur plan (99% nowadays all linked to repo rate, so its either decrease or increase as per rbi decision). Unless you got something else then have to request manually.
3. Increase or decrease repo rate is faster in PSU compared to Private banks (sometimes they won't reduce and u have to request manually by paying some amount to adjust as per latest repo rate, varies from bank to bank and especially in Private this problem occurs...
two points:

1. Ur current bank is private bank
2. Ur listed banks are psu

And ur current interest rate 8.2% is "one of the best" interest rate currently

Keep in mind them for below points

1. Regular home loan "always" have lesser interest than OD linked home loan.
2. Increase or decrease is always based on ur plan (99% nowadays all linked to repo rate, so its either decrease or increase as per rbi decision). Unless you got something else then have to request manually.
3. Increase or decrease repo rate is faster in PSU compared to Private banks (sometimes they won't reduce and u have to request manually by paying some amount to adjust as per latest repo rate, varies from bank to bank and especially in Private this problem occurs compared to Public).

Also, do note interest varies between

1. Regular loan vs OD linked loan
2. Regular loan vs Balance transfer loan

As per bank websites of BOB/SBI, its 8.65% currently as starting price (Regular loan). If u have a solid CIBIL of 800 above and negotiation power might come to 8.5% (didn't expect less than that), again this is general assumption because Balance transfers always have -0.5% adjustment than market with attractive offers because they want u to change the bank for your home loan.

Note: Same interest can provide ur current bank if u ask them once what others offered to you.

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These are the SBI rates current for balance transfer.

--------------------

With that, your questions

  1. Should I go for Balance transfer in first place? Are there any hidden clauses? I can move my emergency fund/FDs to OD and on paper it looks very good.

Its upto you. Charges same like when u apply loan at the beginning, like processing fee, mortage charges etc. Go for it if u always have atleast 10-15% loan amount in OD, that saves a lot of interest. Note: Go for OD if u can keep all the time, not just one or two months in a year. Otherwise regular loan with pre-payment of every year will have same impact.

  1. Will the banks bring down the rate in later months? Like BOB said they offered 8.2 till 31st March perhaps due to FY end.
  2. Even if I go with any of banks with a said rate of 8.4, do they increase/decrease in accordance with RBI repo rates? I see people bashing HDFC, but after merger of HDFC and HDFC bank, they seem to follow RBI guidelines wrt rates. My fear is they offer me 8.4 and then increase it in few months.


same like ur HDFC loan interest increase/decrease. 8.2% based on RBI repo rate. All banks do that, and its entire tenure. If u don't want u have to go 'fixed' like personal loan but AFAIK none of indian banks offer fixed interest for home loan. But interest will be higher in that case.

  1. If i go with 8.4, would i be able to negotiate a better rate in later months? I did that with HDFC few years back but that time they were not repo linked with RBI.

ur taking about HDFC and HDFC Bank merger, and earlier experience. I hope u already aware that its always possible upto the repo rate based on our negotiation skills.

Btw, when did u took ur HDFC loan?
 
Solution
I am exploring for balance transfer of HL from HDFC (8.2%) to a OD linked HL with SBI/BOB/BOI/Others.
Most of the banks have a higher rate. BOB offers 8.4 and BOI offers 8.35 (8.15 with cibil > 825, mine is 805).
Plus there are processing charges & stamp duty etc. which comes to ~40K.

BOB said, they offered it at 8.2 till 31st March but they have increased in new FY.
I had following questions:
  1. Should I go for Balance transfer in first place? Are there any hidden clauses? I can move my emergency fund/FDs to OD and on paper it looks very good.
  2. Will the banks bring down the rate in later months? Like BOB said they offered 8.2 till 31st March perhaps due to FY end.
  3. Even if I go with any of banks with a said rate of 8.4, do they increase/decrease in accordance with RBI repo rates? I see people bashing HDFC, but after merger of HDFC and HDFC bank, they seem to follow RBI guidelines wrt rates. My fear is they offer me 8.4 and then increase it in few months.
  4. If i go with 8.4, would i be able to negotiate a better rate in later months? I did that with HDFC few years back but that time they were not repo linked with RBI.
Thanks!
BoB HL Advantage isn't exactly OD account. There's a subtle difference between the proper OD account (SBI Maxgain) and BOB Advantage.

BoB gives you a saving account linked to HL account. Your current outstanding is calculated as (HL outstanding - SB linked balance).

Now, in SBI Maxgain HL you can withdraw everything you have payed the bank (as principal repayment) in case of an emergency effectively making the current outstanding equal to loan sanctioned amount. This is not the case with BoB Advantage.
 
It goes without saying that you are getting an extremely competitive interest rate at HDFC.

I was sactioned a BoB Adtvantage HL worth 1.15 Cr for 8.8% ROI. The Manager assured me a reduction of (0.25% for CRE, and 0.25% for Advantage OD based). Finally he got me a discount of 0.35% effectvely bringing it down to 8.45%, which after the recent repo rate reduction stands at 8.2%.
 
. I hope u already aware that its always possible upto the repo rate based on our negotiation skills.

Btw, when did u took ur HDFC loan?
First of all, Thanks a lot for detailed explanation.
Yeah, but don't think bank ever goes below a specific rate like right now its 8.2 or 8.15 below which they are not willing to go. Or if they do I am bad negotiator 😀
I took the HL in Sep 2021. then got it revised to lower rates somewhere in 2022. After that its pretty much the lowest bank offers. I can still get -0.05% but they are not agreeing.
Also, I inquired in Banglore BOB branch, and they said they can get me 8.2% with OD. While when I checked in Ahmedabad branch (where I have the property), they said its 8.4% since new FY. Obviously I have to go with Ahmedabad branch, but not sure how Banglore branch said 8.2 or they are just not yet aware of new changes.

BoB gives you a saving account linked to HL account. Your current outstanding is calculated as (HL outstanding - SB linked balance).
yeah! But should not make much difference unless its an absolute emergency to withdraw everything. I guess that is fine.

I was sactioned a BoB Adtvantage HL worth 1.15 Cr for 8.8% ROI. The Manager assured me a reduction of (0.25% for CRE, and 0.25% for Advantage OD based). Finally he got me a discount of 0.35% effectvely bringing it down to 8.45%, which after the recent repo rate reduction stands at 8.2%.
Man thats great. 8.2% with OD is awesome. I checked recently with BOB and they say its 8.4.
 
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