SBI Home Loan for Non-Salaried — Differential Offerings

SBIIt is easier to get a loan if you are a salaried employee. Not so much if you are self-employed, proprietor or a professional. If you were not salaried when you applied for a home loan, you would know. By the way, most bank offer loans to non-salaried under the same loan products. Just that the sanction is much easier if you are salaried. SBI has come out with a home loan product targeted at non-salaried persons. The product is “SBI Home Loan to Non-Salaried-Differential Offerings”. I don’t know what SBI means by appending “Differential Offerings” to the product name. Let’s find out more about this loan product.

Who Is Eligible to Apply for This Loan?

  • Only non-salaried can apply. Salaried employees cannot apply for a home loan under this scheme
  • Minimum age: 18 years
  • If the applicant is a proprietor, a partner in a partnership firm or a director in a company
    • The firm/company must be in existence for at least 3 years
    • The firm must have earned net profit in the last two years
    • Any existing credit facility should be regular and standard. You may have to furnish opinion report from the existing bankers
  • If the proposed house property is acquired in joint names of the proprietor and the proprietorship firm, the firm should be an existing borrower with SBI or a debt-free entity
  • You can take the loan for construction, acquisition of residential flat/house, takeover of home loan from other banks/housing finance companies and repair/renovation of existing house/flat

I am not very sure if professionals such as doctors, CAs will qualify for loan under this scheme.

By the way, if SBI is not your existing banker, expect them to push you to apply for credit facilities (cash credit, overdraft etc) with them. They have a leverage when you apply for a home loan. Don’t expect them to do nothing with it. This is a common business practice. When a bank does you a favour, its expects a favour. SBI may not say this in writing but there are many other ways of conveying this to you.

SBI Home Loan to Non-Salaried — Differential Offerings: Other Details

  • Maximum loan tenure: 30 years. There is no indication that loan tenure is linked to the age of the borrower. In case of non-salaried, retirement may not be as big a concern.
  • Minimum Loan Amount: Rs 50,000
  • Maximum Loan Amount: Rs 50 crores
  • The product is also available as Overdraft (Maxgain).
  • Processing Fee: 0.35% of the loan amount + Applicable GST, subject to a minimum of Rs 2,000 and a maximum of Rs 10,000

What Is Different about This Loan Scheme?

It is not the first time that bank has offered loans to non-salaried. Most banks, even SBI, considers non-salaried under many of their home loan products. It is another matter that it is not easy for non-salaried to get home loans. Now, what SBI claims is that the applicants can get up to 15% higher loan under this loan product. As per SBI press release, “this offering will help increase the home loan eligibility by up to 15%”.

And how will this happen? SBI has entered into an arrangement with India Mortgage Guarantee Corporation (IMGC) to cover home loans under this loan scheme. The caveat is that the borrower will have to bear this cost of this insurance.

What Is a Mortgage Guarantee Cover?

As the name suggests, a mortgage guarantee is an insurance against default on the loan. Therefore, if in any case, you can’t repay the loan, the IMGC will pay to SBI on your behalf. It is another matter that IMGC will recover the funds from you/your security/assets later. Essentially, from the perspective of the lender, the risk of default is passed on to the insurer. Due to this reason, the lender’s exposure (for the guaranteed loan amount) is to IMGC and not you. And that results in higher loan eligibility. Do note this mortgage guarantee cover is quite different from a HLPP (Home Loan Protection Plan). A HLPP typically covers borrower demise, critical illness or accidental death or disability. On the other hand, under the mortgage guarantee scheme, the insured event is the loan default irrespective of the cause. The loan default may be due to the demise or due to the business loss. IMGC will pay.

The lender decides how much loan it wants to get covered. I doubt SBI will ask borrowers to cover the entire loan amount because, in that case, SBI is simply not taking any risk on your ability to repay. The entire risk will be on mortgage guarantor. Moreover, the cost of covering the entire loan amount will be quite high. The fee for mortgage guarantee will be decided by IMGC based on your credit score, size of down payment, type of mortgage and amount of guarantee cover needed. Though not mentioned on IMGC website, the amortization schedule may also be an input in deciding the fee/premium. You may pay the cost upfront or the bank will give you another loan for this premium (just like they do in case of HLPPs).

By the way, as per IMGC website, mortgage guarantee can be purchased for any kind of home loan. Therefore, even salaried people can request banks to offer them loans under mortgage guarantee. IMGC has no issues. However, your bank may offer it only under specific loan products. Through a mortgage guarantee, you may increase your loan eligibility or a higher tenure. Of course, this will come at a cost. To find out more about IMGC and mortgage guarantee cover, you can check IMGC website. Read FAQs here.

Disclaimer: Please understand I am not very clear about the modalities of this tie-up since not much information is available online. I do not know if the insurance cover is optional or mandatory under this plan.

What Is the Rate of Interest?

SBI Home Loan for Non-Salaried — Differential Offerings Interest Rates
Excerpted from SBI website (October 01, 2018)

When I compared the interest rates for a regular home loan product from SBI, the interest rates are exactly the same as that for non-salaried under the regular home loan product. As you would expect, the interest rate for the salaried were marginally lower in the regular home loan product. Unless SBI follows a different sanction criteria for this new loan product (SBI Home Loan for Non-salaried-Differential Offerings), the only difference that I can see is in the form of the higher loan amount. It may help increase the loan tenure and probability of loan approval too. Do note that you will have to pay an insurance premium for the higher eligibility. I do not know about the quantum of the premium that you will have to shell out but this will certainly add to the loan cost.

Further Reading

  1. Product page on SBI Home Loan website
  2. Indian Mortgage Guarantee Corporation website

 

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