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10 June 2011

HSBC Home Loan Payback Offer – What Is This?

With the event of advertisements I wonder how the customer is spoiled for choice. The property rates shooting up fast how the lenders are wooing the buyers to purchase homes and go in for home loans. The newest among them is the HSBC pay back offer that is valid till 31st July 2011.
With a big hoarding seen on the road that you earn money from your home loan made me brush up about this offer and gain some insight into this. According to the offer the bank has an ‘payback offer’, or rather the employees claim this is a bonus to loyal customers to keep along with this HSBC bank loans. According to this offer the borrower is paid back 50% of interest paid as refund on the 12th, 24th , and the 36th EMI (Equated Monthly Installment). Let us consider a figure, for example if your 12th EMI at the end of the first year is Rs. 50, 000, then you get a refund of Rs. 25,000. Accordingly 50% of the interest paid in the 24th and 36th EMI will also get refunded.
Plus and Minuses of HSBC Offer:
This offer is valid for home loans as well as for loans against property. Here the refund or reimbursement if 50% of the interest amount and not the total loan or principal amount. Often when we see the advertisements on roads or in news papers the first though is that you will get 50% of refund on loan amount. This is only on the amount of interest in the EMI. Though it is a fact that interest amount is higher in the beginning EMIs, hence the offer just to indicate the benefits for the customers.
Where does the reimbursed money go? do you get it? Well this amount is directly transferred into your HSBC bank. This is after the EMI has been paid and after a period of 30 days or the money is deposited in your account at end of month. Which gives us another reconsideration that the borrower has to be from this bank? You need to have an account here, maybe with some amount of deposit for opening a new account.
The amount offered as home loan varies from 5 lakhs to 5 crores or even more if you have the repayment capacity and your assets are much higher than the loan asked for. If the offer is so good how much will they charge as interest rate? This is 9%, lower as compared to many other lending institutions. Usually home loans are got at 11 or 12% interest rates and HSBC is offering at 9% with a mark up of 1 to 2%. This is floating rate of interest applied then how much will they increase later on? This question will definitely come up during later tenure of loan repayment but the now is good, too good as the customer will feel special and never ever do we get anything as return and that too happily from the lender itself.
How about prepayment charges? Penalties and other costs?  Other banks do have a 2% or 3% charge as penalty fees but HSBC offer indicates that after a year you can prepay 25% of the amount without any penalty. The question here is you are not allowed to prepay within first six months of the loan available. Also what when a borrower skips an EMI? Well then this offer is not valid, quite justifiable from their view point, to keep the customers paying regular amount as EMIs, and assuring the bank of regular incoming money as asset. Keeping the borrowers hooked by this offer will allow the bank regular customers during period of inflation and also the borrower will be tied with this pay back offer.
The interest rates as compared to other banks and their administrative and processing fees are another point we must consider before making any decision. With a 2 to 3% processing fee you have to pay this in any case or any lender for approval of your home loan. This offer is too good and since it is for a limited period people who have already decided to purchase homes and have completed their survey with different quotations from banks will definitely go in for this HSBC pay back offer.
But, just in case you get a lender who offers you a home loan with lowered interest rate, according to financial advisers, say 10% or less than , will this offer win? Don’t think so, as the loan tenure, EMI, processing fees and interest rate all these points, or the total loan costs, will give an upper hand to the lender who offers home loan on lowered interest rate! Do remember to negotiate against processing and administrative costs, even if there is a promising offer, you can end up saving in the beginning of your home loan!

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