Home saver loan vs regular Home Loans

Home saver loan or HL Overdraft vs regular home loan

How Home Saver Loans Help You Save on Home Loan Interest

When it comes to buying a home, most of us are familiar with regular home loans. You take a lump sum loan to buy a property and pay it back in monthly EMIs. But did you know there's a smarter way to manage your home loan, especially if you're someone who likes to save? It's called a Home Saver Loan. This guide breaks down what Home Saver Loans are, why they're beneficial, and how they can be a game-changer for those with good saving habits.

?What's a Home Saver/Super Saver Loan?

A Home Saver Loan is like a financial magic trick linked to a current or overdraft account. By putting your extra savings into this account, the bank calculates your home loan interest based on the outstanding amount, minus the balance in your linked account. In simple terms, the more you save, the less interest you pay on your home loan. This not only saves you money but also helps you pay off your loan faster.

?For instance, let's say you have a home loan of Rs. 45 lakhs and Rs. 5 lakhs in your Home Saver Loan account. The bank now calculates interest on only Rs. 40 lakhs (Rs. 45 lakhs – Rs. 5 lakhs), reducing your interest payments and speeding up your loan repayment.

?You can not only deposit lump sums but also regularly transfer your monthly savings into the Home Saver Loan, increasing your interest savings over time.

?Why Choose a Home Saver Loan?

1. Interest Savings:

By keeping money in your Home Saver Loan account, you pay less interest, making it possible to finish repaying your loan earlier than planned.

2. Liquidity:

You can take out money from your Home Saver Loan account whenever you need it, without any extra charges.

3. Emergency Fund Management:

Use the account for your emergency fund. Your money keeps saving you on home loan interest, and if an emergency comes up, you can still access the funds.

4. Higher Interest on Home Loan vs. Savings Account:

Even though the Home Saver Loan account doesn't earn interest, it helps you save a lot on home loan interest, which is way more than what you'd earn in a regular savings account.

?Are There Any Downsides?

Of course, let's be honest. Home Saver Loans usually have a slightly higher interest rate (around 0.2-0.50%) compared to regular home loans. Also, not all banks offer this option, and some may have stricter eligibility criteria.

How to Decide?

Now, the big decision – Home Saver Loan or regular home loan?

Interest Amount Saved:

Compare interest rates. If the Home Saver Loan rate is a bit higher, think about the savings on interest payments over the loan period.

Return on Investment:

Check if there are other investments that could give you better returns than the Home Saver Loan interest rate.

Availability:

See if your preferred bank offers Home Saver Loans. If not, a regular home loan might be the right choice.

In a nutshell, if you're someone who likes to save, a Home Saver Loan could be your ticket to paying less interest on your home loan. It's a clever way to use your savings, make your money work efficiently, and reach your dream of owning a home faster.