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Things to keep in mind if you have SBI MaxGain Loan

SBI maxgain home loan home saver loan

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Most of us have to take home loans to purchase a house. Home loans come in multiple variants. One of the popular home loan variants is a Home Saver Loan. A prominent example is the SBI Maxgain Loan product. In this post, I would briefly touch upon how home saver loan products work and what are the things that you must keep in mind if you have already taken such a loan.

How are Home Saver Loans Structured?

I will not go into the details of a specific home loan product such as SBI MaxGain. Will just discuss the basic structure.

There are two types of accounts in Home Saver Loans. Do note nomenclature may vary across loan products.

  1. Loan Account: denotes your actual outstanding amount
  2. Excess Account: You can put money in this account on your own. Alternatively, any interest savings from the loan EMI will be added to this account (discussed later). You can withdraw from this account whenever you want (subject to fulfilment of a few conditions).

For reducing balance loan (like your home loan), interest is calculated every month on the outstanding principal. From your EMI, this monthly interest gets knocked off and anything left is used to reduce the principal amount. For more on how loan EMI payments work, read this post.

For home saver loans, interest for the month is calculated on (Loan Outstanding – Excess Account balance).

Let’s take an example.

Let’s say you take a loan of Rs 50 lacs. Assume the entire amount is disbursed on Day 1. The loan is for 20 years with the interest rate of 9% p.a. Your EMI will be Rs 44,986.

How repayment happens in a regular home loan?

First month

Principal outstanding at the beginning of the month = Rs 50 lacs

EMI= Rs 44,986

Interest for the month = Rs 50 lacs X 9%/12 = Rs 37,500

Principal repayment for the month =  Rs 44,986 – Rs 37,500 = Rs 7,486

Principal outstanding at the end of the month = Rs 50 lacs – Rs 7,486 = Rs 49,92,514

Second month

Principal outstanding at the beginning of the month = Rs 49,92,514

EMI= Rs 44,986

Interest for the month = Rs 49,92,514 X 9%/12 = Rs 37,444

Principal repayment for the month =  Rs 44,986 – Rs 37,444 = Rs 7,542

Principal outstanding at the end of the month = Rs 49,92,514 – Rs 7,542 = Rs 49,84,971

And this process goes on.

How repayment happens in SBI Maxgain Loan or any Home saver loan?

Now, let’s say you put Rs 5 lacs in your OD (excess) account on the first day.

Loan Account (Outstanding balance) = Rs 50 lacs

Excess Account = Rs 5 lacs

Under home loan saver, interest for the month is calculated on (Loan Account – Excess Account)

First month

Principal outstanding at the beginning of the month = Rs 50 lacs  (Loan Account)

Excess Account = Rs 5 lacs

EMI= Rs 44,986

Interest for the month = (Rs 50 lacs – 5 lacs) X 9%/12 = Rs 33,750

Principal repayment for the month = Rs 7,486 (now, this is as per the original amortization schedule. No change here)

You can see EMI is not fully utilized. 33,750 + 7,486 = Rs 41,236. What happens to the rest of EMI.

It gets added to your Excess Account. Excess Account balance at the end of the month = Rs 5 lacs + Rs 3,750 = Rs 5,03,750

Principal outstanding at the end of the month = Rs 50 lacs – Rs 7,486 = Rs 49,92,514

Second month

Principal outstanding at the beginning of the month = Rs 49,92,514 (Loan Account)

Excess Account = Rs 5,03,750 lacs

EMI= Rs 44,986

Interest for the month = (Rs 49.93 lacs – Rs 5.03 lacs) X 9%/12 = Rs 33,666

Principal repayment for the month = Rs 7,542 (now, this is as per the original amortization schedule. No change here)

Excess Account balance at the end of the month = Rs 5.03 lacs + (Rs 44,986 – Rs 33,666 – Rs 3,778 = Rs 5,07,528

Principal outstanding at the end of the month = Rs 49,92,514 – Rs 7,542 = Rs 49,84,971

How do SBI Maxgain or Home Saver Loans benefit?

You can see principal goes down as per original amortization schedule (unless you explicitly make a prepayment).

Keeping the money in the Excess Account does not qualify as prepayment but gives you all the benefits of prepayment and more.

If you make prepayment under a regular home loan, you lose access to the prepayment amount. It is gone. Your loan outstanding goes down.

Under the home saver loan, by keeping the money in Excess Account, you reduce the interest outgo (effectively what prepayment would have achieved). At the same time, you don’t lose access to the money. You can take out money from the Excess Account whenever you want. Just that when you take out the money, your interest gets calculated accordingly for the month. Do note your loan outstanding does not go down when you put money in the Excess Account.

Your interest saved becomes interest earned. After all, the interest savings from the EMI get added to your Excess Account. You can withdraw from Excess Account whenever you want. Had you kept the money in a savings account of a fixed deposit (instead of Excess Account), you would have earned a much lower return than the loan interest rate. Moreover, since this is your own money (and not interest), the growth in Excess account due to interest savings won’t be taxed as interest.

For these reasons, Excess account (or the OD account) makes for a perfect destination for short term or emergency funds.

Home saver loan gives the benefits of prepayment without compromising liquidity or flexibility with your money.

Things to keep in mind if you have taken a home saver loan

#1 Under Home Saver loan, interest saved is interest earned. If there is no interest to save, there will be no interest earned. When the Excess Account balance is higher than the Principal Outstanding (Loan Account), the extra amount (Excess Account- Loan Account) does not help you save any interest. In SBI Maxgain parlance, book balance will be positive in this situation.

Hence, you don’t earn any interest on the extra amount. Therefore, make sure that the Excess Account balance never breaches the Principal outstanding. Let’s say the loan outstanding is Rs 20 lacs. Excess Account has Rs 25 lacs. This extra Rs 5 lacs does not help you with anything. You are better off keeping this money in a fixed deposit.

#2 You need to keep an eye on Loan Account and Excess account balances. Loan account balance will go down every month as per amortization schedule. Excess Account balance will keep going up due to interest savings that get added every month. So, the difference between excess account balance and principal outstanding keeps going down every month automatically. For instance, in the example shared above, the difference went down by Rs. 11,321 in the second month.

#3 You do not get tax benefits under Section 80C for the money that you have kept in Overdraft (Excess) account. Moreover, you do not get tax benefits under Section 24 for the interest that you did not pay (or saved).

#4 You may have to pay a higher rate of interest as compared to a regular home loan product.

#5 You opt for the Home Saver Loans such as SBI MaxGain to retain flexibility with your prepayment money. However, there may be certain pre-conditions before you can make withdrawal from the Excess Account (Overdraft account). For instance, under SBI MaxGain, you can’t take out money from the OD account (Excess Account) till such time you have received possession of the house. Let’s day you have parked Rs 5 lacs in your Excess Account under SBI Maxgain but you have still not received possession of your house. In such a case, you can’t take out this Rs 5 lacs from the Excess account. Defeats the purpose of the loan structure, doesn’t it?

#6 Before those conditions are met, putting money in Excess account (OD account) is same as making a prepayment since you lose control over your money.  Other such loan products may have different pre-conditions. You must keep this aspect in mind. Till such time these conditions are met, put only that money in the Excess account that you are sure you won’t need till the expected possession of the house.

Examples of Home Saver Loan Products

  1. SBI MaxGain
  2. CitiBank Home Credit

45 thoughts on “Things to keep in mind if you have SBI MaxGain Loan”

  1. Deepesh,
    I know some of my friends use Maxgain accounts effectively, Their interest rates are 9.2%. Assume you had 25 Lacs in OD account in April on a loan of 40 Lacs. In the month of May, they take away most of the money from OD account such that interest shows as 200,000+ in provisional certificate which can be submitted to employer for tax benefits on interest paid (or to be paid) for the year. Then after May,you put the money back into OD account which will drastically bring down the interest
    Basically they earn 9.2% on their debt component of their investment while getting tax benefits for interest payments which they dont make.
    This is illegal, but is justice for the loan taker because SBI keeps their interest rates high at 9.2% while general interest rate is 8.5%. And the govt is doing nothing to the taxpayer in regards to these banks keeping interest rates high and looting the people.
    Take that.

    1. Deepesh Raghaw

      Hi Pradeep,
      As you said, it is illegal.
      Two wrongs don’t make a right. Law will eventually catch up.

      1. Hi Deepesh,
        I am sure it will catch up, but many more bigger fishes are in the queue to be caught up which might take a couple of generations.

      2. Hello Deepesh,

        Thanks for the excellent explanation of SBI Maxgain home loan.

        I also have this home loan and have same concern about interest we claim while filing ITR.

        As you said, its illegal then can you please clarify how to address this since SBI doesn’t provide provisional certificate at actual and suggests to download it from their website which is as per regular home loan ( I think it doesn’t consider excess amount ).

        Appreciate your feedback.

        Thank you.
        Niraj

  2. Thankyou Mr.Deepesh for the detailed explanation.
    Is the procedure to prepay the SBI Maxgain loan same as other home loans or does it differ?for eg: if we have a surplus amount which we dont require for any other purpose and we wish to use this amount for loan prepayment.

  3. Thankyou Mr.Deepesh for the detailed explanation.
    Is the procedure to prepay the SBI Maxgain loan same as other home loans or does it differ?for eg: if we have a surplus amount which we dont require for any other purpose and we wish to use this amount for loan prepayment.

  4. Thanks Deepesh for another excellent article. If suppose we withdraw the entire excess amount for an emergency, then the Interest amount will be computed based on Outstanding Priniciple Balance + Excess Amount Withdrawn? Please correct me if I am wrong?

    1. Deepesh Raghaw

      You are welcome Bavan.
      Interest will be calculated on Outstanding balance – Excess account balance.

  5. Ashvin Ambaliya

    Hi Deepak,
    Thanks for detailed article. I have just got home loan from HDFC @8.75%. Is it possible to convert it to MaxGain? Will it be beneficial?
    Also, should I take loan against LIC policy and re-pay principle amount? Thank you in advance for your reply.

    1. Deepesh Raghaw

      Hi Ashwin,
      At what rate, do you get Maxgain loan?
      Don’t take loan against LIC policy to repay loan. You will take a loan at 10% to prepay a loan at 8.75%. Not a good choice.

  6. Hi
    I have Maxgain loan of 30 lacs. The flat is under construction and full amount is not yet disbursed. Around 70% amount is disbursed to builder. Now I have some additional amount which I wanted to park. Can i get the benefit. lest consider if I put 5 lacs in this account can i get the benefit of that.
    Note I have not got the possession yet.

    Please suggest.

  7. Hi,

    I have just take a SBI Maxgain loan at 8.9% in March 2019. Now the rates have drastically fallen down to almost 8.35% for a vanilla home loan from SBI. Can I convert my Maxgain loan to a simple term loan and get benefit of the new rate (because as per my terms of loan, the rate of 8.9% will be fixed for one year from the date of disbursement)

  8. Hi,
    Can I open the OD account in Max gain without putting an mount in the Excess account initially or there is any minimum balance which needs to be maintained in it.
    Also is the Interest charges same for this Maxgain as other SBI Home Loans.

  9. Can I close the loan account when principal due minus excess amount becomes zero (If I am not wrong, in this scenario, interest should come zero only)? Or in other words, my question is can I close loan account if money is not withdrawn at all from excess amount?

  10. Hi deepesh.
    I have a doubt . If by keeping money in excess account , and you told it will not reduce total outstanding principal amount , but EMI is getting deducted regularly with a automozly calculated fixed principal amount is deducted every month .

    1) Then does loan tenure reduced .?
    2) As automized fixed calculated principal amount is getting deducted every month by keeping money in excess account then principal amount must be reduced for that few EMO in which period money is kept in excess account??

  11. Hi deepesh.
    I have a doubt . If by keeping money in excess account , and you told it will not reduce total outstanding principal amount , but EMI is getting deducted regularly with a automozly calculated fixed principal amount is deducted every month .

    1) Then does loan tenure reduced .?
    2) As automized fixed calculated principal amount is getting deducted every month by keeping money in excess account then principal amount must be reduced for that few EMO in which period money is kept in excess account??
    3) one more doubt is it possible to switch from MAXGAIN loan account to general loan account ? Any fees SBI will charge for that

    1. Deepesh Raghaw

      Hi Manoj,
      1. Loan tenure does not go down.
      2. Principal goes down as per the original schedule. The interest savings move to the OD account.
      3. Please check this with the bank.

  12. Many Thanks for the detailed explanation. It is of help.
    I have one question; how can I check (cross verify) if money parked in excess account is actually helping me as explained in the example? Pl suggest.

  13. Hi Deepesh,

    Thank for the Info. Infact while knowing the fact about max-gain I took the max gain loan in 2015. Now I have accumulated the surplus which equal to outstanding and that means interest is almost Zero.
    The doubt which I got here is I am monitoring the statement for last 2 months and checking that EMI deducted from the bank is showing it as Book Value and nothing is getting adjusted to Principle.
    I want to keep the max gain open for another 5 years which will give me flexibility to have liquidity. But if the principle is not getting reduced( Drawing power is constant) , then after five years, if I want to withdraw the amount from max gain it will still show the same outstanding which is there Today.
    How Bank will control as the tenure and EMI amount both is constant?
    Or is it something which I need to intimate bank that Principle is not getting adjusted monthly?

    Your comment will be highly appreciated.

    Thanks

  14. Hi Aditya,
    It matches to my query as well. Even I have parked all my money in maxgain which makes a zero interest. As per rules I believe that principal should deduct as per amortisation schedule, but its not. Its constant since 5 months, from the time loan moratorium was applied by RBI. I have not taken the moratorium, so my EMI continues to be deducted, intrest remains zero, and all my emi becomes surplus to my available balance which I can take out immediately after the emi ia deducted.
    I took up with the bank manager, but she is not understanding this issue at all, rather she doesn’t even listen to me and keeps on asking me to close the loan account, as I have surplus amount in OD account.
    I strongly believe that this is a glitch in sbi’s software, as it did not revert in sept as well when the moratorium is over now!
    Writing to customer care does not help at all. It gets redirected to the bank ultimately.

    Deepesh, please let us know if you have any information on this. I searched a lot over the net, but this is the first portal where I see someone who has observed the same issue as I did.
    My friends also have same issue with their respective bank branch.

    1. Hey Pankaj, I too have the same problem. Even all the Maxgain holders across the country face this issue post moratorium. I havent opted moratorium but the Principal amount remains the same from April 2020 till date.

      Branch Manager does not accept that the issue is with SBI end. The only rude answer I got was , DP will not be reduced and if you want convert your Maxgain to Term Loan. Tired of reaching official twitter handle of SBI, RACPC but no luck.

      LESSON FOR LIFETIME : NEVER GET A LOAN WITH SBI..

      SBI Schemes are good but the managers and staffs working there are totally insane, when I said i will take this issue to Chairman , his reply was do whatever you want and I know what to do.
      Fed up to the core. Any Maxgain holders if your account has prinicipal reduced please let me know…

  15. Hello Dipesh,
    I am waiting for answers for the queries raised by Mr. Aditya and Mr. Pankaj Thorat. If you answer these queries, I improve my udnerstanding on Maxgain.
    I have a additionation query. If my principle amount is almost same as my surplus amount, will the reduction in EMI can help me? Pricipally, is there any possibility for redcution in EMI in SBI Maxgain based on the surplus amount in the OD account.
    I will apprecitate your response.
    Best wishes
    Venu

  16. Hello Deepesh
    I have recently reduced by rate of interest of my max gain account.
    It should change my original amortization schedule. Does it change or not?

    Thank you in advance for your reply.

    Reply

  17. Hi Deepesh,
    Nice Article, But i have observed that Max gain accounts always have higher interest rates than normal home loan interest rate, so I think loan buyer must have excess amount up to 25% of loan in his account otherwise it not worth full.

    Thanks
    Sachin K

  18. I too have the same problem. Even all the Maxgain holders across the country face this issue post moratorium. I havent opted moratorium but the Principal amount remains the same from April 2020 till date.

    Branch Manager does not accept that the issue is with SBI end. The only rude answer I got was , DP will not be reduced and if you want convert your Maxgain to Term Loan. Tired of reaching official twitter handle of SBI, RACPC but no luck.

    LESSON FOR LIFETIME : NEVER GET A LOAN WITH SBI..

    SBI Schemes are good but the managers and staffs working there are totally insane, when I said i will take this issue to Chairman , his reply was do whatever you want and I know what to do.
    Fed up to the core. Any Maxgain holders if your account has prinicipal reduced please let me know…

  19. Hello Deepesh,
    In my SBI Maxgain account, Book balance is shows as positive. So basically I can withdraw this book balance amount, right ?
    Regards.

      1. Narayana Murthy B.A

        Hi Deepesh,

        Please help me on my question , I have SBI maxgain account below are the details

        Book Balance :-4,45,120
        Avl Balance : 24,53,928
        Limit : 28,99,049
        Drawing Power : 28,99,049

        Even I went to SBI asked Manager can I withdraw money from Avilable balance ,he said I can
        1. I want to draw 10 Lakhs & use it for other purpose, its correct to do it ?. Bank says as its OD account we can do it. also he said SBI charges 0.5% extra for Maxgain scheme.
        2. Once I pull 10 lakhs, my interest will go up, in housing loan account, All these days interest was going down,now it will shoot up, are we eligible claim Tax benefit for this ?.

        Thanks
        Narayana murthy

  20. Hi Deepesh,

    You have an excellent site to us understand SBI Maxgain product functioning.
    I have a question, what is meant by SBI calculated interest on a daily basis and how can we take advantage of this?

    Interest is calculated on the Book Balance on a daily basis and is debited at the end of the month. So at the end of the month what happens if I take out some surplus amount from OD (does it impact the interest I was saving all through the month by keeping surplus amount in OD?)

    Please help me understand this better.
    Thanks!

    Regards,
    Rajesh S

    1. Thanks Rajesh!
      Not sure if I got your query right.
      Yes, daily balance will be considered for interest calculation.
      When you take out money from OD account, the net outstanding goes up and you pay more interest (or save less interest).

  21. Hi Deepesh,

    What is the difference between SBI’s MCLR and EBLR? I understand recently they have introduced EBLR.
    It is advantageous to convert my loan to EBLR and what are the benefits with that.

    Please help me understand this better.
    Thanks!

    Regards,
    Rajesh S

    1. Hi Rajesh,
      These are different benchmarks. MCLR is marginal cost of funding (internal to bank).
      EBR is linked to repo rate (which is external).
      Depends on the deal your bank offers. The difference in the two loan interest rates and switching charges.
      EBR is likely to be more transparent. I prefer transparency.

  22. Hello All,
    I am also facing the same issue where my drawing power has become constant and it is now more than the sanctioned loan. I have opened a lot of tickets but no use. I think we are paying excess interest as book balance = Drawing power- available balance.
    Please suggest on how to solve this issue. The RACPC guys are clueless and does not have an answer

  23. Narayana Murthy B.A

    Hi Deepesh,
    Please help me on my question , I have SBI maxgain account below are the details
    Book Balance :-4,45,120
    Avl Balance : 24,53,928
    Limit : 28,99,049
    Drawing Power : 28,99,049
    Even I went to SBI asked Manager can I withdraw money from Avilable balance ,he said I can
    1. I want to draw 10 Lakhs & use it for other purpose, its correct to do it ?. Bank says as its OD account we can do it. also he said SBI charges 0.5% extra for Maxgain scheme.
    2. Once I pull 10 lakhs, my interest will go up, in housing loan account, All these days interest was going down,now it will shoot up, are we eligible claim Tax benefit for this ?.
    Thanks
    Narayana murthy

    1. Hi Narayana,
      Not sure if I got your query right.
      You will be able to take benefits (and a higher one) if you withdraw from the OD account.

  24. abrar hazarika

    Hello Deepesh,
    I have a query. My EMI date is 5th. So on 6th of April I found that the principal amount is reduced from Drawing Power and the same amount (15k) is reduced from my Available Balance as well.

    5th April
    DP = 28,00,000
    Av Bal = 6,75,000

    6th April (morning)
    DP = 27,85,000
    Av Bal = 6,60,000

    Later in the 6th evening, EMI amount will be credited.

    Is this correct? I found it baffling.

  25. Anusha Nagineni

    Hi Deepesh , very good article on SBI Maxi gain.
    My query is my loan amt 30L, every month my EMI 22k gets credited to the OD account and interest gets deducted say 9k. So I get 13k to OD which I can use, I don’t see how principal amount is getting repaid as per amortization schedule.
    It just feels I’m only paying interest, but loan outstanding is not going down much.

  26. Thanks, Deepesh for explaining the mechanics of MaxGain with examples. Really helpful. However, on Sep 11 and Nov 10, Pankaj and Prabhu have asked you question wrt. application of moratorium on their loans without their consent. I am also in the same boat and looking for an answer.
    Would you be kind enough to share your thoughts?
    Many thanks in advance!

  27. Tanmay Tamboli

    I have SBI maxgain home loan since Oct 2016. Every year my interest rate reset. What I want to know does the Amortization plan principal repayment also keeps on changing with new interest rate or it remains same as per the Amortization plan when the Loan get sanctioned?

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