Home Loans

In the past, people used to purchase a home (flat) when there were enough savings in account to afford own (larger sq feet) flat or when retirement period was nearby. But now, people in tier I, tier II and tier III cities are investing to purchase a dream home at a young age. They consider dream home to be a place that gives us unconditional love, happiness and comfort after stressful a day at work. Now, home loans are easily accessible to purchase a dream home from private and public sector banks. So, people opt for home loans while purchasing a flat.

It seems SBI has truly become a synonym when anyone considers a home loan. We will discuss the benefits of applying for home loan from SBI bank in later part of this article.

Home loan products offered by SBI

SBI offers home loan under various products with some variation to basic home loan features. In this article, we will understand the process to apply, documents required, pros and cons, eligibility criteria, rate of interest, etc. for two home loan products offered by SBI:

•  SBI Home Loan: Loan is disbursed to applicant in the form of a term loan with monthly EMI’s for tenure as decided between bank and applicant.
• SBI MAXGAIN: Loan is disbursed in the form of an overdraft facility (current account) which is an equivalent amount to your home loan, wherein you can park surplus funds and withdraw them in the time of need. This is a useful mechanism, thus maximizing savings on interest burden each month. It also reduces the tenure of the loan.

Some of the other home loan products offered by SBI are SBI Flexi, SBI Yuva Home Loan, SBI home loan for NRIs, etc.

Interest Rates

SBI offers home loan at the lowest interest rates among other PSUs and Pvt Banks. However, w.e.f 19th Sep, 2013 SBI revised its base rate i.e. minimum lending rate to 9.8 per cent. This led to increase in interest rates on home loans. Now, interest rates for home loans are as follows:

Loan Amount	Effective Rate of Interest
Up to Rs 30 Lakhs	10.05% p.a.
Above Rs 30 Lakhs	10.2% p.a.

Under SBI Maxgain, you have to pay additional interest rate of 0.25 per cent for loan above Rs 1 crore. 

Computing EMI chart

EMI chart for Rs 1 Lakh at applicable interest rates is calculated below:

	EMI for Rs 1 Lakh
Yr/Rate	10.05%	10.2%	10.45%
5	2,127	2,135	2,147
10	1,324	1,333	1,347
15	1,078	1,087	1,102
20	982	978	995
25	926	923	941

Savings while applying for a loan in SBI MAXGAIN

Consider, Mr.XYZ has taken a loan of Rs 30 lakhs for a period of 15 years. So, interest rate applicable will be 10.05%. She has taken a home loan under SBI Maxgain scheme and will keep the surplus funds of Rs 10,000 every month from her savings into overdraft (current) account with SBI Maxgain for 3 years during her repayment tenure. Now, let’s compute a repayment table with this information for SBI Home Loan and SBI Maxgain products. Then, we will analyse interest and tenure of loan saved in her case with SBI Maxgain.

Particulars	Normal Loan	Maxgain
EMI	32,330	32,330
No. Of Payments	180	180
Actual No. Of EMIs	180	167
Surplus Investment to Maxgain (3 years * 10,000)	-	3,60,000
Total Interest Paid	28,19,397	27,34,118
Interest saved in Maxgain		85,279
Tenure of loan saved in Maxgain		13 months

Process of Home Loan from SBI

You can visit the nearest branch and apply for home loan after inquiring with representative or else visit their website www.sbi.co.in and click on apply for housing loan in personal banking. Fill the online form and then submit it. You will receive a call from a relationship manager of SBI to guide you through the loan process. In online process too, you will be asked to visit nearest branch and meet a representative to complete the procedure / verify the documents to submit.

Check list of home loan documents needed 

General documents for home loans

• Duly filled application form and 2 photographs
• Identity proof of applicant (PAN card/ passport/ drivers licence/ voter id card)
• Current residence address proof (Telephone bill / electricity bill, ration card, etc)
• Bank a/c statements (salary /individual/ business)
• Loan a/c statement of last 1 year for any previous loan

For Salaried Employees

• Salary certificate or last 3 months salary certificate
• Income tax returns of last 2 years and form 16
• Photocopy of employee id-card
• Employer certificate, appointment letter, increment letter, etc.

For Self Employed / Professionals

• Income tax returns of last 3 years
• Balance sheet and profit and loss a/c for last 3 years (certified true copy)
• TDS certificate (Form 16 A, if applicable)
• Business proof (Sales tax registration, etc.)
• Challans of advance income tax paid (photocopy)

For NRI’s and PIO’s

• Passport with visa copy
• Work permit, work contract and appointment letter
• Employer’s id card and employment profile for last 5 years
• Valid residence address proof
• Statement of overseas bank a/c and Indian NRE a/c which reflects salary credit of last 6 months
• Salary slips (3 months) or tax returns
• Power of attorney in bank format

Property documents from builder / society

• NOC from builder / society in bank’s format
• Sales agreement (Registered)
• Letter of allotment from private builder / housing board/ society
• Blueprint stamped by municipal authority
• All payments receipt to builder / seller
• Occupancy certificate and share certificate (for resale flat)

For Disbursement

• Demand letter from builder / seller
• Architect certificate with stage of construction for new flat
• Post-dated cheques for 24 months of EMI
• Original NOC in bank’s format

Agreement for sale, payment receipts (original) and a/c statement showing debit of payments made to seller (builder)

Applicable fees and charges for home loan process with SBI are as follows:

• Processing fee is 0.5% of the loan amount (Max Rs 20,000). This fee is the lowest among all other banks. However, with other banks you can negotiate on processing fees, but with SBI it’s fixed.
• Mortgage charges of 0.2% of loan amount (as per stamp duty act)
• Title clearance and search report is Rs 2,750
• Documentation cost is Rs 1,500
• Fees for valuation report is Rs 750 + Sales tax (Rs 827)
• Fees for structural engineer report is Rs 1500 + Sales tax (Rs 1654) (applicable to property older than 15 years)
• Home insurance premium. It’s mandatory to have your home insured from SBI while taking a loan from them. So, in case of any unfortunate event, your home is insured and safe.

Approval time for home loan from SBI

Approval time for home loan from SBI is on an average 1.5 months. Approval time at SBI is much higher than private banks, but it feels wait is worth since at the end you will get the best interest rate in the market. Also, you can take an advantage of loan from SBI Maxgain scheme which saves the interest payable by reducing tenure of loan.

Eligibility Criteria

Particulars	Salaried	Self-employed
Age	21 years to 60 years	21 years to 70 years
Income	Min. Rs 1.2 lakhs p.a.	Min. Rs 2 lakhs p.a.
Tenure	5 years to 30 years	5 years to 30 years
Experience	Min. 2 years	Min. 3 years

Margin required from an individual while taking home loan is:

Particulars	Margin (Min)
Loan up to Rs 20 lakhs	10%
Loan above Rs 20 lakhs and up to Rs 75 lakhs	20%
Loan above Rs 75 lakhs	25%

Repayments

Loan is to be repaid in EMI over the tenure of the loan which can be maximum 30 years or up to the age of 70 years.

Advantages of home loan from SBI are as follows:

• Lowest interest rates
• Interest rates are calculated on daily reducing balance
• Lowest processing charges
• No prepayment penalties
• Reducing interest burden and loan tenure by taking home loan in maxgain scheme
• Network of over 13,700 branches nationwide which gives access to your home loan account at nearest branch

Disadvantage of home loan from SBI are as follows:

• Processing time is approx. 1.5 months, which is much higher compare to private banks
• No door step service. Required visit to nearest bank branch at least 3 times to complete the   procedure of loan
• There are complaints from borrowers regarding service and slow process by executives to disburse the loan amount
• Exhaustive list of documents required while applying for home loan
• Getting a sanction of home loan is an issue if you are a salaried person working with a small firm or self-employed (We recommend you create a strong credit history in such cases and improve your CIBIL score)

To conclude, let’s have a look at steps for getting a home loan from SBI:

Step 1: Contact nearest SBI branch to understand your eligibility criteria for home loan and documents required to submit with application form

Step 2: Submit required documents with application form to relationship manager at bank

Step 3: Field investigation by bank

Step 4: Sanction of loan and credit appraisal by the bank

Step 5: Borrower will receive an offer letter from bank

Step 6: Submission of legal documents and legal check

Step 7: Valuation check by third party technician (engineer) appointed by bank

Step 8: Evaluation of third party technical report

Step 9: Registration of property documents

Step 10: Submit post-dated cheques to bank and signing of agreements

Step 11: Disbursement of loan