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About Mahindra Finance
Mahindra is a reputed manufacturer of agricultural vehicles like tractors and pick-up trucks. Mahindra Finance started its innings in the Indian financial sector as a captive financier of Mahindra utility vehicles in the early 1990s. Gradually, the company moved from financing Mahindra vehicles to non-Mahindra vehicles. These vehicles include tractors, commercial vehicle, construction equipment, and pre-owned vehicles. SME finance, personal loans, and housing finance activities followed in due course. Mahindra Finance set up a subsidiary named Mahindra Rural Housing Finance Limited to cater to the housing needs of the rural population.
About Mahindra Finance Home Loans
Mahindra Finance has various loans on offer such as vehicle loans, personal loans, agricultural utility vehicle loans, and Home Loans. Home Loans are available for a variety of purposes such as the construction of homes, purchase of new houses, and repairs and renovations. The advantage of Mahindra Home Finance is that it has an extensive network across the country. The company offers attractive rates of interest, both on a fixed-rate and floating-rate basis. Flexible repayment options make Mahindra Finance Home Loans popular among both the rural and urban population. Mahindra Finance is a certified lender under PMAY-Urban Scheme.
Mahindra Finance Home Loan Interest
Mahindra Finance is a private-sector home financing company. Hence, it does not adhere to the concept of Marginal Cost of Funds Lending Rates (MCLR) or Repo Rate Linked Lending Rates (RLLR) that commercial banks follow. However, Mahindra Finance has a Prime Lending Rate (PLR) mechanism in place that relates to the market rates. Therefore, the Mahindra Finance PLR varies with the changes in the market rates. Some of the critical market rate indicators are repo rates, reverse repo rates, and the T-bill rates.
Mahindra Finance offers both fixed and floating rates of interest on Home Loans. The Mahindra Finance PLR follows a risk-based approach. Therefore, its computation depends on various market-related and internal features such as:
- Weighted average cost of funds
- Administrative Cost
- Risk Premium
- Profit Margin
The interest rate applicable to each borrower depends on other factors such as:
- Type of the asset
- Borrower profile
- Repayment capacity
- Other financial commitments of the borrower
- Credit history
- Loan to Value ratio
- Mode of payment
- Loan repayment tenure
- The geographical location of the borrower
- The end use of the asset
Thus, each borrower will end up with a different rate of interest depending on the above parameters.
Mahindra Finance Home Loan Interest Structure
Mahindra Finance Home Loan has fixed and floating rates of interest for its customers. The mode of interest depends on the occupation and the nature of income of the prospective borrower.
- Salaried customers in urban and semi-urban areas: These customers get the benefit of a floating rate of interest that depends on the market fluctuations. Hence, the final rate of interest is subject to change whenever there is a change in the Mahindra Finance PLR.
- Non-salaried customers in urban and semi-urban areas: This category of customers gets a fixed rate for the entire tenure of their loan. The fixed-rate is the rate applicable on the date of the first disbursement of the loan. However, the fixed rate is subject to revision every three years, depending on the market conditions.
Mahindra Finance Home Loan Interest Rate
- Mahindra Finance Home Loan Floating rates of interest start from 11.50% onwards
- Mahindra Finance Home Loan Fixed rates of interest start from 16.50% onwards
Mahindra Finance Home Loan Interest Rate for PMAY borrowers
The rates of interest for PMAY borrowers are the same as that of regular Home Loan borrowers depending on their occupation and nature of income.
Mahindra Finance Home Loan Interest Rate - Points to Note
- Salaried customers have the benefit of a floating rate of interest. The rates of interest start from 11.50%. It can be different for each borrower depending on other factors discussed above.
- Non-salaried customers, such as self-employed individuals get a fixed rate of interest that is subject to review every three years.
Mahindra Finance Home Loan Interest Rate - Methods of Calculation
Mahindra Finance calculates Home Loan interest on the monthly reducing balance method. Usually, the EMIs are scheduled for repayment during the initial ten days of every month.
Mahindra Finance Home Loan Interest - Modes of Repayment
Mahindra Finance caters to different types of Home Loan borrowers. These borrowers can be from villages with agricultural income. Hence, Mahindra Finance offers a flexible range of repayment options.
- Equated Monthly Instalments or EMIs: This option is the most common of all. Salaried persons, self-employed individuals, and others having a regular source of monthly income can opt for this repayment mode.
- Equated Quarterly/Half-yearly Instalments: Farmers and agriculturists do not have a monthly source of income. Such borrowers can opt for the EQI/EHI modes to schedule their instalments to coincide with the harvesting period.
- The repayment can be in cash or cheque. Setting up an ECS mandate is one of the easiest ways of repaying your Home Loan.
Mahindra Finance Home Loan - PMAY Subsidy
Mahindra Finance offers loans to PMAY beneficiaries. One should satisfy the eligibility criteria prescribed by the Government of India in this regard. The treatment of the PMAY housing loan is like the regular Home Loan, except that the PMAY loan has an upfront subsidy component.
The income eligibility criteria for PMAY are as follows:
PMAY has four categories of borrowers
- Economically Weaker Section - EWS
This category comprises of households or families having a total annual income less than or equal to 3 Lakhs.
- Low Income Group - LIG
Families having annual family income more than 3 Lakhs and equal to 6 Lakhs constitute the Low-Income Group.
- Middle-Income Group-I - MIG-I
MIG-I includes those families having a total annual income of more than 6 Lakhs and up to 12 Lakhs.
- Middle-Income Group-II - MIG-II
Households having annual family income from all sources higher than 12 Lakhs and up to 18 Lakhs fall into the MIG-II category
- PMAY subsidy will depend on the group you belong to
- PMAY subsidy is not available on the entire loan you avail. There is a specific restriction on the amount of loan eligible for a grant.
- However, there is no cap on the amount of loan you can otherwise avail
- PMAY subsidy calculation is a complicated procedure. It involves the calculation of the Net Present value of interest for 20 years.
- The ideal way to determine the PMAY subsidy is to use the PMAY subsidy calculator available on the PMAY-Urban official website.
- The PMAY subsidy is an upfront subsidy. Therefore, it is credited into the loan account immediately on its receipt.
|Category of borrower||The maximum amount of loan eligible for a subsidy||Rate of subsidy||The maximum amount of subsidy|
Effect of PMAY Subsidy
- It is an upfront subsidy. Therefore, the loan amount reduces to the extent of subsidy
- The borrower ends up with a substantially lower EMI
Mahindra Finance Home Loan - Prepayment/foreclosure
Borrowers can foreclose their Mahindra Finance Home Loan at any time without incurring any prepayment/foreclosure penalties. Reserve Bank of India has explicitly stated that non-banking housing finance companies should not charge any prepayment or foreclosure penalties from borrowers opting for a floating rate of interest.
Mahindra Finance Home Loan Interest Rates - Frequently Asked Questions
Does Mahindra Finance have a fixed rate of interest Home Loan product?
Yes, Mahindra Finance offers a fixed rate of interest Home Loan product to non-salaried individuals in urban and semi-urban areas. These persons include self-employed professionals and individuals who do not have a regular monthly income in the form of a salary. This Home Loan attracts a fixed rate of interest for the entire tenure of the loan. The rate of interest is reset every three years, depending on the market rate conditions.
How does the fixed rate of interest compare with the floating rate?
Mahindra Finance charges a fixed rate of interest on Home Loans at rates starting from 16.50%. The corresponding rate of interest on the floating rate of interest loans is 11.50% onwards. The difference is because of the non-fixed nature of income of the self-employed individuals.
Loans to such individuals have a higher risk premium as compared to Home Loans to salaried persons.
How does the monthly reducing balance interest calculation compare with the daily reducing balance mode?
Mahindra Finance follows the monthly reducing balance mode of interest calculation on Home Loans. This method does not consider the EMI paid during the month for calculating interest. It calculates the interest on the outstanding balance on the last day of the previous month. Therefore, the customer loses out on the interest benefit on the EMIs paid for a minimum of one month every time. Commercial banks follow the daily reducing balance method for calculating the Home Loan interest. The customers get the interest benefit on the EMI they pay.
What is the EHI and EQI method of repayment of a Home Loan?
Everyone knows that EMI stands for Equated Monthly Instalments. Similarly, EQI and EHI stand for Equated Quarterly Instalments and Equated Half-yearly instalments. The EMI is the ideal mode of repayment for people who get their monthly salary or income. However, farmers do not have any monthly income. Their income coincides with the harvesting season that is usually quarterly or half-yearly. Hence, such people benefit by opting for the EQI or the EHI modes of repayment.
Does Mahindra Finance help PMAY borrowers to obtain the subsidy?
Existing borrowers should visit the nearest branch of Mahindra Finance and submit the PMAY form along with the Customer Affidavit. Stamp duty is payable on the affidavit depending on state laws. This submission will help Mahindra Finance to apply for the CLSS. The Government of India and National Housing Bank decides the subsidy eligibility and amount. On receiving the subsidy, it is credited to the account upfront.
How does the EMI reduce in the case of a PMAY loan?
Consider the case of a borrower applying for a PMAY loan for 6 Lakhs. The borrower belongs to EWS category. The maximum eligible loan amount for calculation of subsidy is 6 Lakhs. Hence, the borrower has a fully subsidised loan. The maximum amount of subsidy is 2.67 Lakhs. If the borrower is eligible for the maximum subsidy, this amount of 2.67 Lakhs is credited to his/her loan account. The principal amount, therefore, reduces to 3.33 Lakhs. The EMI will be calculated on the reduced principal balance 3.33 Lakhs and not on the loan amount of 6 Lakhs. Therefore, the EMI reduces considerably.
Can I avail a PMAY loan for 25 lakhs if I am eligible for it?
Your PMAY loan eligibility depends on the annual income levels. If your annual family income levels make you eligible for 25 Lakhs as Home Loan, you can avail PMAY loan for 25 Lakhs.
Under such circumstances, how will my subsidy amount be determined?
Your subsidy amount also depends on the category to which you belong. There is a ceiling on the maximum amount of loan eligible for PMAY subsidy. In this case, you belong to the MIG-II category. Hence, the maximum amount of loan eligible for subsidy is 12 Lakhs. You can avail the maximum grant of 2.30 Lakhs on the available loan amount of 12 Lakhs. The loan amount above 12 Lakhs is an unsubsidised loan. The subsidy of 2.30 Lakhs is reduced from the loan amount of 25 Lakhs. Therefore, the principal amount reduces to 22.70 Lakhs. Your EMI will be based on this amount.
At what rate will Mahindra Finance calculate interest on a PMAY loan after the credit of subsidy?
Mahindra Finance calculates interest at the contracted rate on all PMAY loan accounts. The subsidy does not have any effect on the interest calculation because it is claimed from the Government and credit upfront to the borrower?s account.
What are the benefits of applying for Mahindra Finance Home Loan?
Mahindra Finance Home Loan offers the following benefits to its customers.