All You Need To Know About Home Saver Loan
With rising number of project defaults and possession delays, a homebuyer has to run from post to pillar to arrange for ongoing rent expenses, loan EMIs (equated monthly installment) and prepayments, all at the same time. The emergency funds cease to exist for buyers who are stuck in such housing projects. For such buyers, a home saver loan is an option that banks offer for handling contingencies.
What is home saver loan?
In a home saver loan, borrowers can pay more when they have surplus funds and withdraw from the same accumulated sum at the time of an emergency. The concept of home saver loan is to make use of your deposit in your bank account to offset a part of your principal. Once a part of the principal is offset, the payable interest also comes down. For instance, Sachin Verma deposited Rs 5 lakh in his current or savings account which is linked to his home saver account and left it. His payable interest will be calculated not on the loan outstanding but on the net outstanding amount (loan outstanding minus Rs 5 lakh). Moreover, Verma will be able to withdraw this money whenever he wants it. In the end, Verma saved money by paying lesser interest without touching his emergency funds.
Things to know
1) Usually, borrowers do not prefer home saver loan as it involves keeping money in savings or current account. Investors prefer mutual funds which gives better returns. However, home saver loan account offers better liquidity as compared to mutual funds.
2) Home saver loan is expensive as they are given at a higher rate than the usual home loan. The interest can vary up to 0.5 to 1 per cent higher than a regular home loan interest rate.
3) Home saver loan is ideal when the loan prepayment amount is very high and the borrower needs to park that amount in the linked account. This type of loan is limited to private banks and few public sector banks. The eligibility criteria might be little different from regular loans.