Should you go for the 3-month moratorium for your home loan?

The short answer is YES, if you are looking for liquidity; and NO if you have enough cash at hand.

People are especially spooked by the possible impact that is mentioned by SBI

• "Impact in case of Auto Loan – For a loan of Rs.6 Lacs with a remaining maturity of 54 months the additional interest payable would be Rs.19,000 approx. equal to additional 1.5 EMIs.
• Impact in case of Home Loan – For a loan of Rs.30 Lacs with a remaining maturity of 15 years, the net additional interest would be approx. 2.34 Lacs equal to 8 EMIs"

The bank is spot on about the impact but the impact is not so much if one understands how a loan product works. 
However, given the psychology of the customers about the notional impact they see that is spread over the entire loan term (typically 20 years for a home loan), the bank might have decided to alert the customers about the potential impact beforehand so as to avoid any unpleasant communications afterwards. 

I think the bank could also have mentioned about a recourse of reducing the impact e.g. if you increase your EMI by around 2%, the additional 8 EMIs would be effectively nullified. But then the banks would need to revise ECS mandates, post dated cheques etc. 

It's high time RBI introduced a variable ECS (with upper limits if need be) mandates so that any changes the interest have an instant impact on the EMI amount. 

I will recommend once again: Blindly go for the 3-month deferment if you really need a liquidity. The impact is not beyond the simple interest charged to you on the outstanding loan amount. 

SBI Home Loan with Maxgain: A cool experience

First and the foremost: SBI Home Loan with Maxgain feature is THE best home loan product in the market. If anyone thinks otherwise then we can speak. 

Since last few months or so, SBI has completely separated their home loan business. The complete loan processing happens at RACPC. Your home branch only acts as a "sourcing branch". 

Now the managers in your branch can't play spoilsport to your loan party. They can no longer cross sell insurance, loan cover etc. Nor can they delay or reject your applications for frivolous reasons. 

Here are the high level steps during the course of a loan. 

Stage 1: Online or Offline? 

Most of the banks have started accepting online applications for different types of loans and SBI is also not behind. If you are very particular about filling the form yourself and probably want lesser visits to the branch/agent then "online" is the better way for you to start. 

In any case, the online application tool is a good way to check your eligibility, the actual applicable prevailing interest rates in your particular case, or any variants of home loan products. 

Stage 2: Arranging personal documents

It is the simplest part. Start collecting your personal documents like bank statements for 6 months, 3 salary slips etc. Check the entire list to avoid any problems later.

Stage 3: Arranging property documents

As almost everyone who has availed or tried to avail a loan from SBI will tell you, SBI has a stringent check on the property documents. 

Here a good agent can make a lot of difference. Remember that for every problem there is an alternative. Don't lose hope if you find anything short in your set of documents. There are ways to get alternative or duplicate documents. 

You also need society NOC (Yo should get the SBI format beforehand) before your loan is sanctioned. 

Stage 4: Agent or no agent? 

Although I usually prefer to do things myself, a good and experienced agent is always recommended. Moreover it's the bank that pays these agents so you don't have to worry about any brokerage or extra charges. 

In my case, the agent prepared a "watertight" file which was sanctioned within just 1 day after the file got "logged" in their system. 

Stage 5: Loan application

It's the time when you actually submit the application after completing all the formalities like arranging personal and property documents, issued cheques for the processing fees (if any), title report, structural audit report (if any) etc. 

Stage 6: File logging

Your loan application file is actually logged in after the bank manages to get all the documents from you and all other dependent documents like the society NOC (if society), CIBIL report, structural audit, title report etc. 

Stage 7: Sanctioning

As I have mentioned in the point no. 4, if you apply stringent checks at the time of procuring the documents, then the sanctioning process is like a breeze of air. But in case there are any exceptions (e.g. if there is more than a month's delay then you will have to again get the bank statement and income proof for the delayed period; or any problem in CIBIL score etc. ) then it will unnecessarily cause further delay. 

SBI also sends an sms confirmation once a file is taken in, and then after it's sanctioned. 

Stage 8: Appointment for disbursement formalities

Once your HL application gets sanctioned then SBI will be in a hurry to disburse it to you. You may take your own time for the disbursement though. 

You get a call for an appointment (it takes around 1 hour for an HL application to complete the formalities, so don't take it lightly). 

You will have to keep cash and cheques for the payment towards stamps, property insurance etc. 

Stage 9: Disbursement

You should always be on time for the disbursement appointment. There are always people who just walk in. But if you stick to your time then people at SBI will always cooperate with you. 

These days a loan interest rate is based on MCLR (Marginal Cost of Funds Based Lending Rate) which is very beneficial especially falling-rates regime. Don't worry if that is too technical for you. 

Stage 10: Operating Maxgain (OD account)

Every HL equal to or greater than 20L qualifies for a Maxgain account. It's basically an OD account which helps you save immensely in the long run. Always insist on Maxgain. 

I have not included much technical terms (it's a different thing that I am also not an expert in it ;-)). Feel free to ask any question in the comments seciton, technical or non technical regarding SBI HL. 

Disclosure: I have absolutely no commercial interest in SBI or any of its agents. I personally took my loan from SBI from the RACPC3, Baner, Pune branch where I got a very good experience which compelled me to write this post. 

Switch your loan now!

Contrary to what the ET says I would like to present my view regarding why one should switch to a new lender in the current market situation. 

Whenever there is a high interest regime, the spread tend to be low i.e. interest rates move closer to the base rates. 
e.g. Axis Bank and BOB are offering home loans at the base rate (0 spread). Most other banks are also maintaining the spread for new customers at the minimum for roughly the following two reasons. 
1. They have to structure the final (base rate + spread) interest rates competitively, so there is a limitation on the likelihood of increased base rate. 
2. With high cost of funds, the reduction in base rate is already ruled out. 

As a result, the only sane option left for them is to move the base rate and the final interest rate as close as possible!

Therefore when you switch now, you will stand to gain in the long term. Whenever interest rates crash, you will automatically benefit as you have very less or even 0 spread. 

Don't hesitate to switch your home loan now!

HDFC reduces RPLR to 16.40%

HDFC has done a great favour to its customers last month by reducing the RPLR from 16.50 to 16.40, i.e. a huge drop of 0.1%. 

Even the existing customers will benefit with this significant move. 

I request the readers to post their would-be savings (I'm sure it must be in multiples of lakhs and crores) with the revised interest rates. 

Thank you HDFC. 

Paypal Charging $1 and $1.95?

Those who add a new credit card to paypal will notice that actually the following two transactions take place on your card. 

a) $1 immediately once you add a card
b) $1.95 when you "verify" your credit card

But don't worry, the $1 transaction is canceled after some time (In my case i got the cancellation sms right after the card verification). 
And the $1.95 will be credited back to your card account in couple of working days after you enter the verification code. 

Generally there are misconceptions regarding paypal and people are reluctant to use it. Paypal is also responsible for their bad reputation as in many cases it's very difficult to reach them. (I remember having to call them multiple times over phone using gmail's call phone feature with proxy US IP ;-))

These things apart, you can buy using paypal with confidence once you know what you are doing. 

Additional 1L deduction for Home Loan buyers!

Source: http://economictimes.indiatimes.com/news/economy/policy/budget-2013-home-loan-borrowers-allowed-additional-deduction-of-rs-1-lakh/articleshow/18725752.cms

Wait.. don't jump with joy if you are an existing home loan customer. 

The additional 1L deduction is applicable to only those who fullfil the following criterias

1. First time home loan

2. Loan amount not above 25L

3. Disbursement during the FY 2013-14

That means if you are an existing customer then forget about any benefit.
Switching to a new borrower will not help either as it will not be considered as a first time loan. (evil laugh)

Enjoy!

Shifted to Axis Bank Power Home Loan

Finally after much deliberations I have actually shifted my loan to Axis Bank. 
The terms of the loan are as below: 

1. Interest rate: 10.25% (Base Rate 10.00 + Spread 0.25)
2. Processing fee: Rs. 5620/-
3. Mortgage charges: ~Rs. 3900/-
4. Other charges: ~Rs. 1700/-
5. Loan tenure: 8 years

It feels good to be out of a discriminatory system (BPLR) and to have moved to the Base Rate.