Overdraft usually comes at 0.35-0.5% higher interest. The real question isn't "overdraft or normal home loan?" It's how much surplus you actually keep on average.
When we took our home loan, the bank offered both options. Instead of guessing, we calculated one thing: how much surplus needs to stay parked at all times to offset the higher overdraft interest? There is a clear break-even. Below it, overdraft costs more. Above it, it saves interest and keeps your money liquid.
Park only your emergency fund or short-term planned expenses here. Money you won't touch for 3+ years is better off in equity.
Home loan overdraft is a dropline overdraft - the limit drops monthly by sanctioned amount / tenure. Always get it sanctioned higher than your actual need as a safety buffer.
Interactive Tools
Calculate your monthly EMI for any loan amount, rate, and tenure.
e.g. 20000000 for ₹2 crore
e.g. 180 = 15 years, 240 = 20 years
Find out exactly how much surplus you need to keep parked for overdraft to make financial sense.
Typically 0.35-0.5% higher than home loan rate
To check if OD makes sense for you
We'll tell you whether OD makes financial sense for your situation.
How the math works
Step 01
Your EMI is calculated at the regular home loan rate. With an overdraft, you keep the same EMI - this is key.
Step 02
We calculate what your EMI stream is worth today discounted at the higher overdraft rate. This is lower than the loan amount.
Step 03
Loan amount minus that PV = the surplus you must keep parked at all times. If your idle cash exceeds this, OD wins.