What is a home loan Overdraft (OD)

Question: I've been following your site for quite sometime now and I always find interesting facts. Today I was reading ‘6 Tax Saving Tips for Working Couples’ and found that for a joint home loan both of us can avail tax exemption. This is quite an information. Thanks a lot for sharing such details.


I have one more question regarding my home loan which is SBI Max Gain Home Loan, forgive my ignorance, as I am not aware of most of the details of the loan. Recently I applied for an online access to my Max Gain Home Loan account and was monitoring my loan account transactions. I've taken an ECS from ICICI account (my salary account) to SBI, my EMI gets debited on 15th of every month. I noticed that certain amount of money is showing up in available balance, I guess that is the OD amount sanctioned. As I am in need of some money I wanted to use that amount, before withdrawing that amount I visited the RACPC branch of SBI in Secunderabad and queried them about the money. They informed me that the purpose of OD is to have the available balance amount whenever needed and one can also park their surplus amounts into the account just like my savings account.


One thing is not clear to me, like how this will help me if I park my surplus amount, as I understand that will not affect my EMI? And I noticed a surprising thing, that is an amount X  is being debited towards interest payment on the last day every month from the available balance. I am not sure why this is happening, can you please explain the complete details of the SBI Max Gain Home Loan and this OD facility? I felt that the bank officials are also not quite aware of the complete details of this Max Gain Home Loan. Can you please help me with the details and also let me know about that interest debit happening along with my EMI every month. Awaiting your reply.

Answer: Dear Ms Lavanya, SBI-Maxgain home loan is granted as an Overdraft (OD) facility  - it gives you added flexibility to operate your Home Loan Account like your Savings/Current account. Off-set home loans are generally priced higher than regular home loans.


This type of an arrangement serves to minimize your interest cost on your home loan. Every month when the loan EMI is paid, interest (at the applicable rate) is calculated on the aggregate principal outstanding after taking into account the balance in the linked current account. Therefore, you can park your temporary and permanent cash surplus funds (if any) in the SBI-Maxgain home loan account for the dual advantage of - reducing your interest outgo on the loan and at the same time deposit/withdraw from this Savings/Current account freely (whenever you require).


In this way, you can see that the principal gets paid off much quicker even where the money deposited in the linked current account is withdrawn later.


In case you do not use the linked-current account at all, the break-up of interest and principal will remain the same as a normal home loan.


Warm Regards,

Expert @ InvestmentYogi

Published Jan 24 2011




Ashvin said:

But I want to know in detail, If my loan is not fully reimbersed even then can I withdraw my surplus amount available.

April 24, 2011 6:20 AM

Ashvin said:

I have home loan of 14.8 Lakhs under SBI maxgain. Last disbursement will be in next month. I already have 4 lakhs surplus in loan OD a/c transfered from Saving A/c. If I want to withdraw those 4 lakhs today, Is it possible or I have to wait till Full loan disbursement....Plz reply..

April 24, 2011 6:36 AM

Soju Sebastian said:

I worked out a sheet for SBI Max gain type of loan. Check it out at

April 27, 2011 1:02 PM

dr.s.c.ginoya said:

i m a private practitiner .

May 3, 2011 11:19 PM

jeet said:

Hey Soju,

great job on the calculator.

Can you explain the last few fields, and how one is benefiting if he deposits some surplus amount .

May 11, 2011 8:00 AM

Soju Sebatian said:


I have assumed that the benefit you gonna have is the total sum of EMI's saved if the loan is getting closed before the tenure used for the calculation of EMI/tenure of a regular type of loan. For Max Gain the EMI never changes and hence the principle gets paid much better in the initial period thus reducing the interest if you have parked some surplus amount. I have put it as estimated interest gain because you would be loosing the deposit interest on the surplus amount parked. If the actual savings needs to be calculated you would need to consider the investment returns of the surplus amount you have on the account.

May 15, 2011 12:55 AM

George said:

Good one Soju, Even I had a max gain and sometimes its confusing on what you are saving and how the calculations are. Your excel sheet really helps.

May 17, 2011 5:00 AM

abhishek said:

Hi Soju, this worksheet is not working now..

Can you upload once again.

May 27, 2011 2:16 PM

Soju Sebastian said:

I have upload the sheet again in the following url:

May 29, 2011 3:03 PM

Bond.. James bond said:

Nice work Soju.!!

June 12, 2011 9:00 AM

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