Most of us think of a Home Loan as plain and simple EMI based loans. But now, with the rising competition, various Banks and Financial Institutions have started offering assorted features and benefits along with their Home loan products. On one hand, a few lenders are offering different variants of Home Loan whereas on the other hand, some lenders are altering their schemes to make it more attractive to the borrowers. Axis Bank’s Happy Ending Home Loan is one of its kind. This is a new Home Loan scheme launched by Axis Bank wherein they reward their borrowers for their regular repayment history by waiving off the last 12 EMIs. Following is a detailed analysis of this product.
Happy Ending Home Loan – The Features:
a) EMI based loan: This is a regular and simple EMI based loan wherein the borrowers pay a regular installment each month on the loan amount borrowed.
b) Last 12 EMI waived off: Under this scheme, you can avail a Home loan and get your last 12 EMIs waived off at no extra cost if you pay your EMIs regularly.
c) Regular EMI: Paying a regular EMI means, there can be maximum 3 instances in the overall loan tenure wherein the installment was not paid in time and exceeded 30 days from its actual due date. However, the delay should never be over 90 days during the life of the loan.
d) Loan Tenure: This scheme is applicable for loans with a minimum tenure of 20 years i.e. 240 months at the time of disbursement of loan and may extend up to 30 years.
e) Pre-payment on Loan: You can pre-pay your loan as long as the loan tenure does not fall below 15 years i.e. 180 months.
f) Interest Rate: You can avail this loan at standard interest rate offered by Axis Bank i.e. at no extra premium on interest rate or higher interest rate.
g) Balance Transfer: This scheme is available for Balance transfer loans also i.e. if you are running a Home Loan with any other financier, then you can take over your loan to Axis Bank for a tenure of 20 years and avail this offer.
h) Minimum Loan Amount: This scheme is applicable for a minimum loan amount of Rs.3 lacs
i) Maximum Loan and Margin: The maximum loan amount cannot exceed beyond a certain margin on the market value of the property. The margin varies as per loan amount which is as follows:
|S. No||Loan Amount||Margin|
|1||For Loan up to Rs.20 Lacs||15%|
|2||For Loan Rs.20 Lacs to up to Rs.75 Lacs||20%|
|3||For Loan above Rs.75 Lacs||25%|
Happy Ending Home Loan – Conditions:
a) Interest Type: This scheme is offered only under ‘floating rate’ option and not applicable for ‘fixed interest rate’ option. Also, the option to convert the ‘floating rate’ to ‘fixed rate’ later, is not offered under this scheme.
b) Tenure: The minimum tenure option under this scheme is 20 years and maximum is 30 years for salaried and self-employed customers where the age of the borrower do not exceed 60 years or 65 years respectively at loan maturity.
c) Loan To Value (LTV) Ratio: Following is the maximum loan as a percentage to the property value permissible under this scheme
|S. No||Loan Amount||LTV|
|1||For Loan up to Rs.20 Lacs||85% of Documented Cost or Market Value of property (Whichever is Lower)|
|2||For Loan Rs.20 Lacs to up to Rs.75 Lacs||85% of Documented Cost subject to 80% of the Market value of property|
|3||For Loan above Rs.75 Lacs||LTV up to 85% of the Documented cost subject to 75 % of the Market Value|
d) Clubbing with any other scheme: is not allowed under this Home Loan. For Ex: Several builders/ developers offer subvention scheme to their customers wherein the builder agrees to pay interest portion of the loan for 12 months. If any borrower who has already availed the subvention scheme or any other scheme for that matter, is not eligible to borrow under Happy Ending Home Loan scheme by Axis Bank.
e) Fixed EMI Cycle: Under this scheme, the EMI cycle will remain 5th of every month for all customers. No deviations permitted for changing EMI cycle.
f) Pre-Payment: is allowed but to be eligible under this scheme, your loan must be live for at least 180 months from the date of first disbursement and part prepayments may result in tenure decrease of your loan if you opt for the same instead of EMI reduction.
g) Actual Benefit: The benefit passed on to you will be lower of your original 12 EMIs (at the time of loan disbursement) or opening balance of your 12th EMI from the bottom as per the schedule or the closing principle after the payment of your 180th pre-EMI/EMI if the balance EMIs due is less than 12.
How it actually works- Calculation:
Scenario 1: Where EMI changes with the rise in Interest rate
Suppose the original EMI was Rs.25,450 but with the rise in interest rate, the EMI increased to Rs.30,500. Then the benefit provided shall be as under:
|EMI||Amount||12 months benefit|
|Original EMI (at the time of disbursement)||Rs.25,450||Rs.3,05,400|
|Current EMI after rise in interest rate||Rs.30,500||Rs.3,66,000|
In this case, the actual benefit provided to the customer shall be Rs.3,05,400 and not Rs.3,66,000.
Scenario 2: Where actual EMIs pending are less than 12 months
Suppose the borrower qualified under this scheme and the loan has been live for 180 months. However, he has 6 residual EMIs only. In this case, the waiver benefit will be given for only 6 EMIs.
This scheme is beneficial for:
a) Those who opt for a longer tenure of 20-30 years.
b) Under construction/ Plot plus construction or who pay Pre-EMI initially as the minimum seasoning norm of 180 months is computed from the date of first disbursement and not from the date of final disbursement.
c) Those who regularly repay their loan EMI (reward for them in fact!)
d) Those who do not intend to pre-pay the loan before 180 months
e) Who pre pay their loan and opt for EMI reduction instead of tenure reduction
a) Those who do not repay their loan timely and the delay in payment crosses 90 days of actual due date
b) Those who target to repay/ pre-close their loan before 15 years i.e. 180 months
c) Those who might switch over in the middle of the loan to some other borrower for rate reduction or any other reason.
Some of the other Home Loan variants offered by other Banks include:
OverDraft Facility: A few public sector Banks like SBI and PNB are offering Home Loans as OverDraft facility which is beneficial for those who want to have a complete control over their loan account. This product provides a flexibility to the borrowers to deposit surplus funds to their loan accounts and save on the interest portion of the loan. At the same time, it also provides an option to withdraw their surplus cash from the OD (OverDraft) Account in case of an emergency.
Fixed plus Floating Interest: Some of the lenders like ICICI Bank and HDFC Limited are providing their borrowers the option to choose a fixed rate for initial 1-3 years of their loan tenure. This option works best for those who want their EMI to be locked for a certain amount of time.
As far as home loan repayment in general goes, the shorter the tenure the lesser the interest outgo and hence the total cost of the loan. You can log on to BankBazaar.com’s Home Loan EMI Calculator to figure out why this is the case. You can use generic loan examples or use your current home loan as an example to understand how loan repayment works.The calculator gives you detailed insights on your amortization table, how long you will take to cover ground on your loan repayment, what will be the total interest outgo etc. Most borrowers in today’s scenario prefer to close out a home loan debt in the first 10-12 yrs opting for prepayment etc. For such individuals, Axis Happy Home loan offer may not be the ideal loan variant. However, if your monthly financial commitments require you to opt for a longer repayment tenure, then this product may fit in nicely with your plan and help you save partially on your loan.