Every young person with a new job has one piece of advice from everyone he meets- buy a house as soon as you can. That is the dream of everyone- to own a home. With sky rocketing property prices, and increasing rents one can only appreciate this urgency.After getting job,  I saw a few properties and selected a flat to buy. I had heard a lot about SBI Maxgain home loan features, review and easy prepayment rules. For me, it seemed to be the best product but i applied for 2-3 home loans.

But as soon as I got into the process of applying for a loan, I became really disappointed. Most banks have reasonable rate of interest, but very cumbersome disbursement options. They release the payments in tranches, and need build up payment proofs and proof of completion for each stage. But as someone who’d seen houses being built in my colony, I know the process isn’t that smooth. Sometimes you don’t buy iron because prices are high, sometimes the construction guy can’t produce bills- the list is endless. So I called up my friend Shivani again. Being a banker, she was my best hope for guiding me through this.

Introduction to SBI Maxgain

After hearing my worries, Shivani laughed and told me, “It’s almost as if State Bank has designed a home loan especially for you- SBI Maxgain.” So what is this SBI Maxgain- I’ll explain it to you just as Shivani did to me.

SBI Maxgain Home Loan

Sbi Maxgain home loan is a home loan variant of SBI that works like an overdraft account. It is an account where you have a certain amount sanctioned as a loan to you- you withdraw it for use as much and when you need it. When you’re done and have the money back, you pay the amount back and get interest charged only on the amount you withdrew.

Confused? Let me tell you about it in detail but first lets understand some basic terms here

What is an Overdraft Facility – SBI Maxgain OD Facility?

An overdraft facility is a facility where you are allowed to borrow money from a pre sanctioned limit, and you are allowed to re-deposit it back in the limit. You are charged interest only on the amount you used and for the number of days you used it.

Overdraft comes from the word overdrawn- leading back to where the word came from. In core banking, customers with good standing were allowed to withdraw money even if their account was empty- thus over-drawing. They would deposit it back when they had it and pay interest for the time and amount used.

 What is the drawing power of a loan account?

Drawing power- as the name suggests, is the amount you can withdraw from your loan account. For instance, if a customer has a loan sanctioned of 35 lac, his drawing power at that time is 35 lac. If after, say one year he has paid off 12 installments, his drawing power will be reduced by the amount already paid off.

What is the difference between book balance and available balance?

Book Balance	Available Balance
Book balance is the difference between drawing power and available balance.	Available balance is the balance in an overdraft account that has not been withdrawn yet and is ready for use.

SBI Maxgain Account- How does SBI Maxgain Home Loan work?

This is how SBI Maxgain home loan works

Step 1. You get SBI Maxgain account sanctioned- say Rs. 20 lac- and your home is the collateral security for the same.

Step 2. You need five lac to pay to the builder, you withdraw it from your account and give it to him.

Step 3. After 20 days, you get bonus payment from your office and deposit the 5 lac back into the SBI Maxgain account.

Step 4. SBI will charge you rate of interest only on Rs 5 lac for 20 days- the amount and time you actually used.

Step 6. You again have 20 lac in your SBI Maxgain account for use. You can withdraw it as and when you need, and deposit back as per your convenience.

SBI Maxgain Home Loan Interest Rates

Please find below the SBI Maxgain home loan interest rates. The interesting thing here is that SBI gives a discount on rate of interest to women borrowers.

SBI Maxgain has many special features –SBI Maxgain Features

• It is purely an overdraft product, so you can also use this for purposes other than your home construction- you can use it for personal expenses, shopping etc anything
• SBI Maxgain account gives you the option to avail a chequebook and ATM. Pretty cool, right?
• Better liquidity- you can use your money at any time and deposit it back- you cannot imagine the comfort and financial ease it gives when you have availed a loan
• Savings- SBI Maxgain calculates interest on your outstanding amount at the end of the day. So it saves your interest when you can park your surplus money in Maxgain account.

SBI Maxgain Prepayment Rules

Now this is where it gets a little tricky- but I’ll give you a step by step again, just like Shivani gave me.

1. Your loan outstanding will keep decreasing month by month- however if you deposit any excess amount it will  a surplus in your account.
2. This in turn increases your available balance and reduces your book balance- decreasing your interest expense.

Understanding SBI Maxgain account statement- Example

SBI Maxgain Advantages

As anyone with simple math can understand and appreciate- this is a wonderful loan product from SBI. Still, let’s jot down the benefits

Saving in interest expense

Many loan takers have this grievance- paying interest for the duration they didn’t even use the money.  In SBI Maxgain account- you pay interest only for the amount and time you use it for. Believe me, it works wonders in your interest expense column.

Liquidity

Liquidity is a boon, especially when you’re just starting out and have to plan your expenses better. Also, liquidty helps cope with contingencies. For people bogged down with monthly EMIs, liquidity is a big concern that needs to be addressed. Thankfully, SBI Maxgain has you covered in that case.

Ease of access- Cheque book and ATM

This is a pure loan product offering cheque book and ATM facility. This makes it a personal loan in true sense- helping you use it for routine expenses as well.

SBI Maxgain Disadvantages

Just like every good thing, this one has disadvantages as well- but for crying out loud, these are all very ignorable/solvable disadvantages.

A little complicated to understand

I think we’ve already covered this one since I have explained it so simply to you that it has become very easy for you. But most people do find it a little complicated to understand. Next time you meet someone like that, share this article link with them.

No tax benefit

Since the re-deposit option exists, tax benefit is not available for money under SBI Maxgain account surplus. As you can see, this is just a made up disadvantage since the interest savings will matter a lot more in quantum that getting a benefit under sec 80C.

High Interest Rates

However, it is important to note that SBI levies a higher rate of interest for Maxgain- 15 basis points more than the normal housing loan ROI.

SBI Maxgain EMI Calculator

In order to calculate your EMI under SBI Maxgain home loan, you can use the following link

https://homeloans.sbi/calculators?caltype=MAXGAINCAL

SBI Maxgain Review

So, here is the final review for SBI Maxgain

• It is always beneficial for the bank. The chances of default are less as you are more of a fixed deposit customer to the bank.
• You will not get any tax benefit on the interest part of home loan for the surplus amount  in SBI Maxgain Account.

Though it may seems very attractive, it is always better to prepay the home loan and invest the money in better instruments like mutual funds for long term.

Now you tell me your views about SBI Maxgain home loan. You will be getting 17 Lakhs, if you invest in mutual funds, more at the end of tenure  in addition to the relief you would be getting after prepayment of home loan.

Rishabh Mehta is now a regular contributor to MoneyChai. He is a banker by profession and a writer by hobby. He has done his Masters in business administration from IMI New Delhi. In the past, he has written freelance for The Times of India and his areas of interest are finance and polity.