Do you have a Home Loan and have idle investments too.Then time to know about Home Saver Option.

I am a corporate employee since 10 years. I started with a salary of Rs. 3,00,000 p.a. After two years, I started drawing Rs. 5,00,000 p.a. So, like any other individual, I wanted to fulfill my first wish in the list, owning a home. After many good discussion sessions with parents, relatives, friends, etc, I decided to buy a 3 bedroom flat for Rs. 30,00,000. When I applied for a loan, I got approval for Rs. 24,00,000. with 20 years tenure, paying Rs.25,000 as EMI. As years passed, my salary, savings,the interest rate of my home loan, and my EMI everything was on uptrend. The graph of expenses and expectations, as well, is going higher. My thoughts are :

• First, close my home loan as fast as I can.
• Next, have funds for unexpected expenses.

So, to close my home loan either I have to increase my EMI or reduce the tenure of the home loan. Since I am earning enough, I would like to increase my EMI. So what happens to my savings and other investments?  I don't want to  move any of my investments. I want to have funds for the reasons unknown. What options do I have then?

Yes, for those under this dilemma, home saver scheme is an option. Where you can deposit your surplus funds in an account and this account will be used to pay your principal amount of your home loan or reduce the interest amount you pay  and this in turn, helps you to reduce the tenure. But the interest you pay will be relatively higher than you pay for a normal home loan. At present, there are five banks which offer this scheme. Each bank's scheme has its own name. And, each scheme has its own advantages and dis-advantages.

Let us get into the details of the options that the banks offer:

SBI Max Gain  Scheme

It enables the customers to earn optimal yield on their savings by reducing interest burden on Home Loans.

• Interest Calculated - Base Rate + 0.25% to 0.30% (At Present 10.00%)
• Eligibility - Salaried individuals 
• Minimum Amount - 20 lakhs
• Allowed to withdraw - Yes

IDBI Home Loan Interest Saver option

Home Loan Interest Saver provides you the facility of linking your Home Loan account with the Flexi Current Account (The interest liability of your home loan comes down to the extent of surplus funds parked in the operative current account. You will be allowed to withdraw or deposit funds from this operative current account as and when required. Interest on Home loans will be calculated on outstanding balance of loan minus balance in the Current Account based on EOD balance. 

• Interest calculated - Base Rate + 0.15% (At Present 10.15%)
• Eligibility - Salaried individuals Who crossed 22 yrs of age.
• Allowed to withdraw - Yes

Citi bank Home Credit Vanilla option Fast Track option

Citibank offers you 2 options in Home Credit loans that you can choose depending on your needs:

Home Credit Vanilla Option :

Home Credit Vanilla option gives you the option of maintaining liquidity. An overdraft line is set on the Home Credit account and interest savings arising out of the Home Credit facility go towards increasing this line, which is always available for withdrawal by you.

Home Credit Fast Track Option :

Home Credit Fast Track gives you the option of repaying your home loan faster. Interest saves are adjusted towards reducing your loan outstanding, which effectively reduce the tenure of your loan and help you close your home loan faster.

• Interest Calculated - 9.95% p.a. to 10.35% p.a.
• Eligibility - Salaried individuals with at least two years experience.
• Minimum Amount - 25 Lakhs
• Allowed to withdraw - Yes

Standard Chartered Home Saver option

The surplus money in your Linked Transaction Account will be used to offset the principal of your home loan.Effectively, interest will be paid only on the difference between the outstanding loan amount and your surplus funds.

• Interest Calculated - 9.95%  to 10.10% p.a.
• Minimum Amount - 5 Lakhs

HSBC Smart Home

Your Smart Home is operated through a Smart Home account that acts as a Current Account with an overdraft limit equal to the amount of the loan disbursed. Your home loan interest is calculated, on the principal outstanding minus the savings deposited in your Smart Home account every month, over and above your EMI. So,you can reduce the quantum of interest paid and thereby reduce the tenure of your loan.

• Interest Calculated - At Present 10.10%
• Eligibility -  21 years
• Minimum Amount - 5 lakhs 

What Makes Smart Home or Home Saver option different from a Normal Home Loan / Advantages with Home Saver Option 

• The interest component or the principal amount on your home loan decreases hence the tenure also decreases.
• You can withdraw money when needed without any prior notice to the bank.
• You are forever on a safe side as you save money for unexpected  necessities. 
• It also helps to reduce tax burden. 
• Calculations are done on a daily basis.

Dis-advantages with the Home Saver Option

• The interest you pay on your home loan is more than you pay for a normal home loan. 
• You might always withdraw the idle money from the account for unnecessary expenses.
• If you are not sure of savings during the tenure you might end up paying more interest on your home loan.
• Banks (some branches) usually lengthen this loan process as the benefit is more to the customers than to the bank.

Punjab National Bank Flexible Housing Loan

Provides the borrowers the advantage of substantial savings on the interest component on account of facility to deposit the surplus funds in the overdraft account and withdraw the same as per the choice ad needs.

• Interest Calculated - BR + 0.5% (At Present 10.05%)
• Eligibility - Below 50 years
• Allowed to withdraw - Yes

Best fit for - Salaried employees and self-employed individuals whose income is not constant.

Before you opt for a Home Saver option, please do know the eligibility and all the terms and conditions about the calculations to avoid confusion. For those who are confident of savings and for those whose return on other investments is lesser, can really try to work on this option.