HSBC today introduced a MyHome loan product that allows borrowers to set a lower equated monthly instalment (EMI) that needs not even cover interest cost initially. | |
| In case where the EMI does not cover the interest due, the bank adds the unpaid interest to the outstanding principal and then the interest gets calculated on the enhanced principal. |
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| Borrowers, under this product, can opt for an EMI that's up to 15 per cent higher or lower. It is similar to a flexible repayment option that's offered by the mortgage market leader Housing Development Finance Corporation (HDFC). |
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| ICICI Bank also allows a variant of flexible EMI, where a borrower is sanctioned a loan higher than the eligible amount and the EMI in the initial years is calculated only on the eligible amount. |
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| Sangeeta Pendurkar, chief marketing officer of HSBC, said existing home loan borrowers can seek conversion of their existing loan into MyHome by paying 2 per cent of the outstanding principal amount as fee. |
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| The rate of interest payable on MyHome is based on the floating interest rate on the bank's SmartHome product, currently varying between 8.50 per cent and 8.75 per cent. |
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| The floating rate is linked to the retail lending rate of the bank, which currently is 9.5 per cent. |
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| Thus, on a loan amount of Rs 15 lakh at 8.5 per cent for a tenor of 25 years, the actual EMI may work out to Rs 12,078. |
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| If the customer chooses to pay 15 per cent less than this amount in the first year, the EMI payable would be Rs 10,266. In that case, the customer would have to shell out Rs 25, 685. |
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| On the other hand, if the same customer chooses to increase his EMI by 15 per cent in the first few years, then he ends up paying Rs 13, 890 initially and the EMI in the last year drops down to Rs 5,491. |
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