Check out Home Loan Overdraft Facility

Home Loan Overdraft

Know more about Home Loan Overdraft Facility

✓ Home Loan from ₹5 Lakhs To ₹5 Cr ✓ Multiple Lending Partners ✓ Attractive Interest Rates

What is Home Loan Overdraft Facility

A home loan overdraft facility essentially allows you to withdraw extra funds for emergencies if you are a home loan borrower. It also allows you to prepay your outstanding home loan principal amount so that you save on the payable interest. This facility will come in handy to you if you have a regular inflow of surplus funds.

Benefits of a Home Loan Overdraft Facility

This facility is one of the best options for double income families with surplus funds or entrepreneurs who earn extra funds regularly. Some of the benefits of a home loan overdraft facility include:

  • You can transfer your regular home loan from a financial institution to another financial institution that offers overdraft home loan facilities.

  • It has greater liquidity on the deposited amount.

  • It is one of the best options for families and individuals with surplus funds.

  • You can withdraw surplus funds anytime.

  • There is no penalty for prepayment of the loan amount.

  • It reduces your loan interest liability whenever some extra funds are deposited.

How does an Overdraft Home Loan Function

  • When you apply for a home loan overdraft facility, your lender will link your home loan account with your dedicated current or savings bank account. You have the liberty to deposit any extra funds in this account at your discretion (similar to that of your normal savings account).

  • The surplus amount, after deducting the EMI payment, is considered as a prepayment amount towards your home loan. The interest to be paid is calculated on the outstanding principal amount. Also, you have the option of withdrawing this extra money whenever needed.

  • This facility, thus, brings down the overall loan responsibility while the interest is charged on the outstanding loan amount only. What makes this facility unique is that you have the option of withdrawing the extra funds as and when you need it. When you withdraw money, the amount is added back to the effective principal amount which was used to calculate the interest.

  • Your EMI amount is not affected when the extra funds are withdrawn. Additionally, the interest is calculated on a regular basis on your outstanding loan amount on that day; whereas the total interest is deducted at once at the end of the month. Thus, any extra funds deposited in the account is deducted from the principal amount and becomes interest-free immediately.

  • The money withdrawn could be used by the lender for whatever they want and the facility can be used even after the loan is paid off. Note that there is a limit on the amount of money you can withdraw under this facility. Some lenders put a cap on this limit at 25% of the home loan amount. But it can differ from bank to bank.

Popular Home Loan Overdraft Facility Providers

Lender

Home Loan Interest Rate

Home Loan Processing Fees

Bajaj Housing Finance Limited

6.65% p.a. onwards

Up to 0.35% of the loan amount

PNB Housing Finance Limited

7.35% p.a. onwards

0.5% of the loan amount

Home First Finance Company

8% p.a. onwards

₹9,990 onwards (plus GST)

Union Bank of India

6.40% p.a. onwards

Higher of 0.5% of the loan amount or ₹15,000 (plus GST)

Regular Home Loan vs Home Loan Overdraft Facility: Key Differences

The main differences between a regular home loan and a home loan overdraft facility are as follows:

Regular Home Loan

Home Loan Overdraft Facility

The outstanding principal amount

The book balance (calculated as outstanding loan amount + surplus funds available in the home loan overdraft account)

The surplus amount paid towards home loan prepayment is automatically deducted, making them unavailable for withdrawing

The surplus amount added to the overdraft account can be withdrawn anytime.

When the home loan is paid off, the amount outstanding becomes zero

The book balance becomes zero when the entire amount is paid off (loan amount + overdrawn amount) along with interest.

Prepayment reduces your balance outstanding

Prepayment increases your available balance and reduces the outstanding amount.

Who Should Not Opt for a Home Loan Overdraft Facility

Borrowers who do not have surplus income coming regularly in or cannot manage the repayment of the overdrawn facility must not opt for a home loan overdraft facility. Such individuals must strictly stick to a regular house loan. Overdraft facilities are supposed to be taken by those who have surplus funds coming in frequently or are certain about an increase in their income in the near future.

FAQs on Home Loan Overdraft

  • ✔️Can I take out an overdraft on a home loan?

    Yes, you can avail an overdraft facility on a home loan or a loan against property. You can also avail an overdraft facility on home loan top-ups or from the lender to whom you have transferred your outstanding home loan balance to, provided they have the overdraft facility.

  • ✔️How to withdraw money from a home loan overdraft account?

    As your home loan account is connected to your savings/personal account, you can transfer money from one account to another at any given point. Lenders/Institutions which provide this facility have systems set up for it. Once you have withdrawn money from your overdraft account and transferred it to your bank account, the outstanding principal and the interest payable will be adjusted accordingly.

  • ✔️Does one have to pay a fee for renewing their home loan overdraft facility?

    Some lenders charge a fee for renewing home loan overdraft facilities, while some do not. One must check the same with the lender.