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Will Home Loan Overdraft Work For You?

A Home Loan is one of the most important investments you will ever take up in your life. Undoubtedly, you need to be sure of all the logistics of it. Here we talk about Home Loan overdraft.

A Home Loan or mortgage is taken in order to purchase property and is one of the things that most of us will have to deal with at some point of time in our lives. If you’re a middle-class individual with a family, a Home Loan is something you’re probably looking out for. And like any respectable borrower, you hope to pay off that loan, interest and all, preferably before the tenure ends.  If you’ve managed to get a flexi Home Loan with reasonable Home Loan rates, this shouldn’t be too much of an issue.

Prepayment of loans has become a common practice amongst loan borrowers. However, some banks/NBFCs will put a limit on the number of prepayments that can be made in a year. This puts most borrowers in a sticky situation. So, many of us are likely to simply drag on through the tenure to pay back the loan, no matter how many years that spans into.

So, is there a way out? Well, now there is.

The Home Loan with Overdraft

So, we already know what an ideal mortgage sounds like; low Home Loan interest rates, reasonable tenure, affordable EMIs, and preferably, a flexi Home Loan for most of us. In a Home Loan with an overdraft facility, the bank/NBFC/lender links a current savings account with the Home Loan account. You can deposit any extra funds in this account, just like you would in a normal savings account.

But, how does it help you?

By virtue of the nature of the overdraft account, any money you put in, over and above the regular EMI, is treated as pre-payment for the loan. The interest, therefore, is only charged on the balance or remaining loan amount. This makes your Home Loan less expensive and gives you the advantage to finish off your payments early.

The most important feature of an overdraft mortgage account is that you can withdraw this money that you have deposited, over and above the EMI, as and when you require. There are usually no limitations to this clause.

Getting an overdraft amount is especially beneficial for those who have tenures that go well above 15 to 20 years. It works well since the value of the property being built is likely to increase in the following years that make up your tenure. There could also be an increase the interest rates or EMI of your mortgage. An overdraft account will ensure that you can deal with such fluctuations and pre-pay the entire amount without defaulting on your loan payments.

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