To understand how relevant it is for a new home loan customer and an existing home loan borrower who wishes to transfer his home loan to SBI, let us first consider the significance of these savings over time.

Let us explore the situation to see if the offer is indeed attractive, like it seems upfront.

Let us consider an example to understand this better. Banks will provide an amortization table, which will help you calculate the costs involved.

SBI Home Loan offer: Rs 30 lakh (Rs 3 million) for 20 years at 8 per cent interest rate frozen for the first year and then follows a floating home loan rate of 10.25 per cent.

For the first year at a frozen rate of 8 per cent the money outflow on the loan : Rs 3 lakh (Rs 300,000).

After one year when the interest rate is changed to the current floating rate of 10.25 per cent: Rs 66.8 lakh (Rs 6.68 million).

Total money outflow over 20 years + Processing fee Nil = Rs 69.8 lakh (Rs 9.98 million).

Total Interest paid out for the loan: 39.8 lakh (Rs 3.98 million).

Bank X: Interest rate of 9.75 per cent for the same loan amount of Rs 30 lakh and a tenure of 20 years and a processing fee of 1 per cent of the loan amount, which is Rs 30,000.

Total money outflow over 20 years = 68.3 lakh (Rs 6.83 million) + 1 per cent processing fee (Rs 30,000) = 68.6 lakh (Rs 6.86 million).

Total interest paid out for the loan = 38.3 lakh (Rs 3.83 million).

So opting for the Bank X will actually offer you a saving of Rs 1.2 lakh (Rs 120,000), even after including the processing fee!

This example makes it clear that the interest rate scheme where 8 per cent is frozen for one year, may not actually be as profitable as it appears upfront.

In fact, you might save more opting for a home loan, which is a little bit higher than the current 8 per cent happy home loan scheme offered.

Also, if across all banks interest rates fall further as is the expected trend, one has to think over this offer carefully before opting for it.