Now, SBI's interest-only EMI gets you 20% more loan

MUMBAI: SBI has introduced a new home loan scheme where the borrower needs to pay only the nterest component in the early years, thereby increasing the loan eligibility or the customer by up to 20%. For instance, an in erest-only EMI on a 15-year Rs 30-lakh loan should work out to around Rs 24,000. On a normal home oan, it would be Rs 31,326, ncluding the principal component. This difference of Rs 6,000 could fetch an additional loan of around Rs 6 lakh.

The new scheme, 'SBI FlexiPay Home Loan', will enable young working pro essionals get a higher loan amount compared to their loan eligibility under normal schemes. But borrowers will have to ensure hat they have the cash resources to meet 10-20% of he property value as this is a regulatory requirement.

“We obtain an authorization from the borrower o raise the EMI if there is an increase in interest rates. This ensures that heir principal liability does not increase,“ said Jayanthi Lakshmi, chief general manager (real estate and housing deve opment). It would also not benefit those who seek to refinance their ex sting loan.

SBI chairman Arundhati Bhattacharya had ear ier in a panel discussion with RBI governor Raghuram Rajan in August proposed that banks be allowed to reintroduce `teaser rate' home loans. Teaser rate loans are those where the interest burden is lower in the initial years but rises subsequently . Rajan had turned down the proposal. “In Flexipay , there is no step-up interest rate. The loan is similar to a regular home loan, except for the moratorium on principal repayment,“ said Lakshmi.

Customers under this scheme will be offered the option of paying only interest during the moratorium (pre-EMI) period of three to five years. The new home loan is available primarily to salaried individuals with a two-year track record. The upper age limit for this scheme is 45 years.Given the target group, the bank offers loans with a repayment tenure of 25 to 30 years under the scheme. However, customers will be free to make prepayments towards their home loan without any prepayment penalty.

The scheme from SBI, which claims to be the largest home loan provider in the country, is aimed at boosting the home loan portfolio at a time when there is a slowdown in loan offtake by corporates.