FAQ - SHORT TERM HOUSING LOAN

Q. Can I get an in-principle approval and actually avail of the loan later?
A. What SBI do is, before you choose the house you want to buy, SBI gives you an in-principle approval based on your income and capacity to repay. This makes the entire process of identifying and buying a house easier and more flexible. You won't be under pressure to identify a house before you know how much funds the bank would make available to you.

Q. And how long is this approval valid?
A. This in-principle approval is valid for 3 months to give you sufficient time to choose a flat/house of your choice.

Q. How long does it take to get my loan sanctioned?
A. Your loan can get sanctioned in a matter of days provided you have all the documents in place.

Q. Can I apply jointly with my spouse? Will both our salaries be taken into consideration for calculating the loan amount?
A. Yes, your salaries can be clubbed for the purpose of calculation of the loan amount. This can be done either when the property is jointly held with the spouse or the spouse stands as a guarantor. Thus, SBI ensures a great deal of flexibility in the entire exercise of financing your house.

Q. What security do I have to furnish?
A. SBI requires a mortgage of the property for which the loan is being taken. Where mortgage can't be provided, other tangible security would need to be provided.
The title of the property should be clear, for which a certificate would be required from the Bank's approved advocate, safeguarding your interests as well as Bank's interests. Additional security may be required where the house is under construction. This may be for an interim period, by way of tangible security or guarantees from sound and solvent individuals.

Q. What are the processing fees charged by the bank?
A. A very nominal processing fee of 0.25% is charged by SBI. Compare this with 1.5-2% charged by the others.

Q. What is EMI?
A. EMI stands for Equated Monthly Installments. This installment comprises both principal and interest components. Use EMI calculator to find out your monthly payments based on the loan amount, the rate of interest and the repayment period. Choose the combination that best meets your financial resources and requirements.

Q. Can I prepay the loan? Are there any penalties?
A. Yes, you can prepay the loan at any stage and without attracting any penalty. You can also credit more than your EMI amount into your loan account and bring down your interest burden as and when funds are available with you. Many financial institutions do not allow you to pay more than the EMI or to prepay the loan, and charge a penalty ranging from 1-2%. In case of takeover of loans by other banks, however, a prepayment penalty of 2% may be levied.

Q. Where can I avail SBI Housing loans?
A. SBI have a network that is unmatched in terms of reach. SBI have also designated special branches across the country to cater to the housing loan requirements of individual customers.

Q. If I have funds, is it still worthwhile to avail of a bank loan for buying a house?
A. It is generally advantageous to take a Housing loan as it would enable you to get tax exemptions. However, please consult your CA/ income tax advisor to know benefits/disadvantages in your specific case.

Q. What are the tax benefits of taking an SBI Housing Loan?
A. Under the Indian Income Tax Act of 1961, resident Indians are eligible for certain tax benefits on principal and interest components of a loan. Under Section 24(1), interest repayment of Rs.1,50,000 per annum qualifies for tax saving under the new Finance Act, provided the property is acquired or constructed with capital borrowed after April 1, 1999 and the acquisition/construction is completed before April 1, 2003 , and the property is self occupied.An added benefit under Section 88 on repayment of principal amount to the extent of Rs 20,000 is also available on the same loan.

Q. How does SBI housing loan compare with those offered by other institutions?
A. There is total transparency with regard to the rate of interest and the fees charged by SBI. SBI offer housing loans with the lowest equated monthly installments, i.e. you pay substantially less in repayments as compared to others. SBI have no upper limit. The loan amount is determined by repaying capacity and the value of property to be financed. SBI offer loans for the longest tenors (up to 20 years) with the flexibility provided to reduce the tenor by prepaying the loan without any penalty. SBI provide finance for both new and old houses/flats and for construction of houses. Cost of furnishing the house can also be included in the project cost.
With an SBI housing loan you can choose between fixed rates of interest and floating interest rates. SBI levy interest based on daily/monthly reducing balance, unlike the annual reducing balance method used by several other financiers/banks.

Q. How do I benefit if the interest is calculated on a daily/monthly reducing balance?
A. On an annual reducing balance method, you will continue to pay interest on amounts you repay during the coming one year as the interest for the year is determined on the basis of the balance outstanding at the beginning of the year. In the case of the daily reducing balance, which is the methodology SBI employs, your interest is calculated only on the outstanding loan amount, which reduces every time you pay off your EMIs or make any prepayments. This in essence lowers your effective rate of interest significantly.