By Chaitali Dutta

Is a home loan overdraft scheme a better way to reduce the interest burden in the long run? How does it work?
—Saurabh Tripathi

Yes, the home loan taken in the form of overdraft, reduces the overall interest outgo by reducing the outstanding balance on which the interest is calculated, by the surplus amount you may have every month. The overdraft account is like the loan account and your salary account rolled into one. Let us consider an illustration: Say your home loan is Rs 25 lakh. On the first of every month, you get a salary of 75,000. You may start using this salary after two days. Hence for the two days, you pay interest on Rs 24.25 lakh instead of on Rs 25 lakh. Also say at the end of the month, you still have Rs 5,000 unused. This amount will also be considered towards the reduction of the outstanding. All these surplus amounts are essentially earning a notional interest of 7.5% or 8% (as per your home loan interest rate) instead of your money earning savings account interest of 3.5%. Another benefit of a home loan as a OD facility is that any surplus in the OD account may be utilised in an emergency and can be withdrawn for usage. This account can therefore act like a Contingency Fund deposit account.

l I and my wife stay in the US on a work visa and will return to India after three years. Can we take a loan from a bank in India to buy a property in Bangalore? What are the documents that I should keep ready?
—Vijay Arora

Non-Resident Indians (NRIs) are indeed eligible for home loans in India to acquire property in any Indian city. Eligibility is determined based on criteria such as age, income, and property value. The standard set of required documents includes PAN card, optional Aadhaar card, passport, work visa, 6-month salary bank account statements, employment offer letter, proof of address in India, proof of address abroad, TIN details, and information regarding any outstanding loans. Upon submission of these documents, banks can issue an In-Principal Approval (IPA), enabling prospective buyers to explore properties within their budget.

The writer is founder, AZUKE Personal Finance Advisory. Send your queries to fepersonalfinance@expressindia.com