Mortgage Rate Calculator Prepayment

Should you go for HSBC's payback offer?

It’s difficult to miss HSBC India Ltd’s latest advertisements for its home loan product: flip through any newspaper or magazine, or look out at hoardings in streets or at bus stops, it’s everywhere. HSBC is currently running a special payback offer on its home loan till 31 July.

Mint Money ran a few numbers to see if this offer makes sense for you or you are better off with another lender.

What’s the offer?

Manish Sinha, head (consumer asset), HSBC India Ltd says, “Our payback offer is on home loans as well as loans against property. With this offer, the customer gets a 50% refund of interest paid in the 12th, 24th and 36th equated monthly instalment (EMI).”

Also see | When It Makes Sense ( PDF )

The EMI has two components—the principal and the interest amount. So if the interest part in your 12th EMI (at the end of the first loan year) is Rs40,000, you get back Rs20,000. Similarly, 50% of the interest part paid in 24th and 36th EMIs will get reimbursed.

The money is directly credited into your savings account after 30 days of paying the instalment. Typically, interest has a higher proportion in the EMI than the principal amount in the first few years of a loan. In the first five years of the loan, the EMI could account for nearly 50% of interest in a 15-year loan.

Says Vipul Patel, director, Home Loan Advisors, an independent mortgage advisory firm, “The psychology of an India consumer is very discount-oriented. He thinks why should I change the loan if I’m getting a discount here. Rates are expected to be hiked around August and this move will help the bank retain its customers at that time.”

Other loan details

Based on the city you live in, you can get a loan between Rs5 lakh and Rs5 crore. For example, if you live in Delhi or Mumbai, the maximum amount you can get is Rs5 crore and for any other metro, such as Chennai and Pune, you can get up to Rs3 crore. Of course, your repayment capacity will also be considered.

The base rate applicable to the offer is 9% and the mark-up is 1-2%. The processing fee is up to 1% of the loan amount, subject to a minimum of Rs10,000 plus a service tax.

The caveats

You cannot prepay the loan for the first six months after disbursal. Subsequently, every financial year, you can prepay up to 25% of the sanctioned amount at no additional fee. Prepayment in excess of 25% per financial year will attract a penalty of 3% of amount prepaid. Remember that you will lose the benefit if there is any delay in paying the EMI. Sinha says, “The payback offer is a loyalty reward for our customer.

Need a Mortgage pre-payment and bi-weekly payment function ...

I just bought my first home and I want to pay it off by the time I turn 30 years old. I'm 20 and I make 30K a year. My husband does as well. I want to pay an extra monthly and 00 yearly towards the mortgage. And I want to do this while making bi-weekly payments for principal/interest/prepayment total. The calculators I have used so far only do 2 out of 3 of the functions I want. And I cut the loan down to about 13 years that way. I know that a calculator doing all three will really knock that time down. I want a calculator that will do all three because I'm ready to pay this off and start on my next property. Can I do this myself? Please help!

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