The much talked about Axis Bank-Happy Ending Home Loan Scheme (official site) is now open for home loan borrowers. But is that scheme really good and should home loan borrowers consider Axis Bank- Happy Ending Home Loan Scheme? Let's try to answer the question in this article and do a Review, Analysis and cover opinions and details about Axis Bank-Happy Ending Home Loan Scheme.
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Here are some of the constraints in the Axis Bank- Happy Ending Home Loan Scheme:
- Only available for "floating" interest rates, not fixed rates.
- Minimum tenure for this "Axis Bank- Happy Ending Home Loans" is 20 years which means customers are kind of forced into atleast 20 years long loan tenure to reap the benefits of this Happy Ending Scheme, even if they want a home loan with tenure of less then 20 years.
Now club it with the above point of floating interest rates of home loan. Usually, the when rates go upwards, the tenure increases. So if that happens anytime during your (atleast) 20 year period, your home loan repayment period will extend further.
Just for an example, if a 0.5% increase in floating interest rate in year 3 causes your loan tenure to increase by 18 months, what is the benefit of this "Axis Bank- Happy Ending Home Loans" waiving off the EMI of 12 months? Image courtesy official Axis Bank site
- If you make a small / partial prepayment, then the scheme benefit may no longer remain valid. Because due to your pre-paid amount, the tenure will come down and schedule of EMI payments will get affected. Minimum association tenure required is 180 months or 15 years.
- Clubbing of any other schemes (internal or external) is not allowed.
For e.g. many builders may offer payment of interest for x no. of months. Other promotional offer is builders pay interest till time of possession and so on. In all these cases (subvention schemes), the "Axis Bank- Happy Ending Home Loans" may not apply because it will mean a kind of prepayment and hence change in schedule so scheme gets invalid and home loan borrowers may not get benefit.
- Switch from floating interest rate to fixed interest rate is not allowed in this scheme
- Switch from high floating rate to low floating rate (usually offered to new customers) is available, but it can result in lesser tenure of your loan period. Therefore, there is a chance of Axis Bank- Happy Ending Home Loan Scheme and its benefits getting invalid.
- Increasing your EMI will also disqualify your "Axis Bank- Happy Ending Home Loans" scheme
- You need to complete atleast 180 months (15 years) with this scheme
- If at the end of 180 months (15 years), due to rate changes or other factors, suppose the no. of EMI's remaining are only for another 5 months. Then, dont expect Axis Bank to pay you back for rest 7 months of already paid EMI's.
After completing the minimum 180 months, the waiver benefit will be given ONLY on the minimum remaining EMI's i.e. 5 EMI's in this case and not 12 as per the initial offering
- In case of rising interest rates, the EMI may rise at the end of loan tenure. However, as per the details available on official Axis Bank site, the benefit will be given only for the initial low EMI amount of 12 months, not the higher EMI amount. It then means that despite getting the 12 months EMI waived off, one may need to pay the difference from his own pocket
- Home loan borrower is not allowed to reduce the EMI and increase the tenure in this scheme, without making a part payment
Review of Axis Bank Happy Ending Home Loan Scheme: Avoid the long committment
Usually, your income over a long period of time like 15 or 20 years, is not going to remain same - it usually rises. Hence, do you wish to carry on the home loan burden for long time with lots of money lying with you, just to get the last 12 EMI's waived off? The anwer will be no.
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Even if you say yes and are willing to continue with the loan for that long period, please note that it comes at a cost. First you are paying interest on every single month that passes by. The longer the loan tenure, the more interest amount you pay (high cost of loan). Second, as long as you are having one outstanding loan, you may no be eligible to take another one till you clear first one. That means you may not be able to buy second property or take any other loan. Third, all banks now-a-days ask for a co-applicant along with primary applicant. The name goes in the bank records so the other co-applicant might also have difficulties in taking a seperate loan till you clear this loan.
I personally dont like the idea of carrying the loan burden over a long period of time. The longer the loan tenure, the more amount you repay to the bank. The sooner you pay back your loan by pre-payments, the better. Forget everything else, just think about the mental peace you will have when you are debt free with no more loans on your head.
Unfortunately, this "Axis Bank- Happy Ending Home Loans" does not offer you that flexibility - not alteast for 15 years.
Overall opinion about Axis Bank-Happy Ending Home Loan Scheme
Even if you stay with this scheme for minimum 15 years with a minimum 20 years loan to start, the full benefit of 12 EMI waivers is not guaranteed.
Overall, this "Axis Bank- Happy Ending Home Loans" scheme might look good in the first sight, but it is kind of locking you in for long term. It is good for someone who is completely OK with a lock-in period of atleast 15 years and a home loan starting with 20 years tenure and does not worry about the loan burden, increasing interest and is fine to pay high tenure of EMI payments to reap benefits of 12 EMI Waivers.
Now with pre-payment charges taken away by all banks and NBFC's on home loans, and with incomes rising over a 15-20 year periods, it is better to get rid of loans sooner by pre-paying the amounts rather than holding onto long term loans.
Tax Benefit on home loan will apply as standard.
In my opinion, the home loan customers should go with the normal standard home loan scheme with no pre-payment penalty and get rid of loans as soon as possible.
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