Super Saver Home Loans
Super Saver Home Loan
It is a type of loan where the borrower can save on interest payments (and repay the loan faster) by placing surplus funds in a bank account linked to the loan.
Banks Offering Super Saver Loans
SBI (Maxgain) Axis Bank (Super-Saver) HSBC (Smart Home), Standard Chartered Bank (HomeSave) Citibank (Home Credit)
How It Works
The loan is repaid in the form of EMIs, but the overdraft facility is reduced each month to the extent of the principal component of the EMI, so it becomes zero by the end of the tenure.
How You Save - 1
If you have a home loan outstanding of 50 Lc at the start of the month and have a balance of 5 Lac in your savings account, you can temporarily transfer it to the linked current account.
The loan outstanding reduces to 45 Lac (50 Lac - 5 Lac) and interest is calculated every day during the month on the reduced loan outstanding till you withdraw it.
How You Save - 2
Bank balances generally idle away in a savings account. Even if you park surpluses for a few days, you earn a better yield than in a bank fixed deposit.
The interest on super saver loans is higher (by about 0.5-1%) than regular home loans.
They are also not tax-deductible, so you must plan payments to avoid losing out on annual tax benefits.
Some banks charge a commitment fee for the unutilised loan amount sanctioned.
The Fine Print
Others have pre-conditions (say, till you receive possession of the house) set to withdraw excess balances.
Super-saver loans can help save on interest payments, but they are also costlier. And, unless you have sizable excess balances for long periods, they don’t make sense.
Now that you know the finer details of how super-saver loans work, you can analyse how much funds you have and choose the right type of home loan for your financial situation.
Make The Right Choice
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.