Your Queries – Loans: In Max-Gain home loan, amortisation schedule changes as interest rate falls

Yes, you will be able to apply for subsidy under PMAY when you apply for a new loan in another bank at the regular rate of interest.

By Chaitali Dutta

I took a Max-Gain home loan for Rs 60 lakh. I got a subsidy of Rs 2.30 lakh. If I park my funds in a Max-Gain account, will the subsidy be reversed? In term loan, after subsidy principal reduces thus resulting in lower EMI/reduced tenure. What happens in Max-Gain account? With changing interest rates does amortisation schedule changes?
—Mudit Bhargava

A Max-Gain is a home loan that is extended like an over draft (OD) facility with the initial limit as the loan amount. If you park your excess funds here, your outstanding will be less than withdrawal limit. When you need those excess parked funds, you can withdraw them with the cheque book which would be issued for this account. The subsidy is treated as a prepayment, and hence the Max-Gain limit is reduced to that extent.

Amortisation schedule is shared at the start of the account. Though subsequent changes in interest rates will change the tenure of the loan, you may not get a printed amortisation schedule from the bank. You need to do that calculation by downloading an amortisation chart online. To answer your question, yes, with the changes in the interest rate the amortisation chart changes.

I work in a bank, so I have taken a staff home loan at interest rate of 4%. I now want to quit the job. Can I get benefits after converting loan on regular bank rate 8.65% or transfer to other bank?
—Avinash Dhotkar

Yes, you will be able to apply for subsidy under PMAY when you apply for a new loan in another bank at the regular rate of interest. However, you will have to close the existing loan which is on a subsidised rate being an employee there.

How can I check whether my repo-linked interest rate has been reduced?
—Suman Kumar
The arrangement letter with your bank will have the interest rate clause. Here you will see the base rate mentioned along with the spread or the margin. In your case, base rate will be the RLLR. Say RLLR is 4% and spread is 3%, your effective rate will be 4+3=7%. Every three months, RLLR is reset. If repo rate is reduced by 20 basis points, RLLR will be 3.8%. However, your spread remains 3%. Hence, new effective rate would be 6.8%. Check on the rate your bank is charging after a month of repo rate change. It should be effective by then.

The writer is founder, AZUKE
Personal Finance Advisory (www.azukefinance.com)
Send your queries to [email protected]