Taking Home Loan on Fixed Deposit

POSTED BY Prashant ON May 16, 2012 3:02 am COMMENTS (37)

I am planning to buy a house with value worth Rs 40L.
I have a FD for 15 L with HDFC, should i take loan over with FD?
Is taking a home loan on existing FD with the same bank better? On what factors does it depend?

37 replies on this article “Taking Home Loan on Fixed Deposit”

  1. Pritam says:

    I am planing to buy a new flat n now i want to sell my existing flat n want to take home loan of around 30-35 lakh n i will sell my existing flat for 50 lakh n want to take loan against my fd of 50 lakh so what the procedure please explain me

    1. Talk to bank, they will be happy for explain you all this .

  2. Anjan says:

    I am in the same boat right now. Need to decide whether to take loan against FD or break the FD itself to fund the purchase of house. Most people are advising me to take loan against FD but it does not make any financial sense to me. If I get 8% from FD and need to pay 10% for home loan, it’s like giving free money to bank even when I have the resources to make an outright purchase.

    Some people say the FD acts like a security but if that FD acts as a collateral, it practically becomes the bank’s property, how is it providing any financial security to me? In any case, I have to pay the bank’s loan by hook or crook or else they will either take my house or the FD amount.

    Please provide some valuable advise regarding this.

    1. Break the FD ! .. simple

    2. syan says:

      dear manish if you have fix deposit so home loan you can get very easy because no any ITR ask and for example if u taking home loan @ 10% rate of interest for 5 years tenure so in 5 years u will pay interest to bank around 220000 rs for amount of loan 8 lakh and other 8 lakh if u will keep fd in any bank for 5 years @ 8% rate of interest so u will get from bank 320000 rs so it mean 1akh rs u getting benefit in 5 years it mean each year 20k benefit and in ur hand 8 lakh rs cash as a fd

      1. Thanks for your comment syan

        1. syan says:

          its ok manish bhai, you can contact on me by mail mj8337 at gmail dot com thanks

  3. ileanalyardson says:

    Yes, you can borrow against the fixed deposit, without breaking it. Since you already have a fixed deposit
    with HDFC bank it is better to take a loan from the same bank. One of the advantages of borrowing against
    FD from the same bank is that the interest rates are lower. You can talk to your HDFC bank executive for
    more details.

  4. Yusuf says:

    Hi All,

    I have a similar situation like Prashant Gangwal as discussed in the forum.

    Buying home is my objective be it a Under construction or Ready to Move–Rent income could be generated.

    I don’t own any house in my name and live with my Parents additionally I have just rented flat on 11K which is next door.

    Budget : 1 BHK or 1RK not exceeding 25L to 27 L including Registration.

    My repayment capacity cannot exceed 20 K from monthly salary 50 K.

    I am salaried & don’t want to Over burden myself as Job securities is the concern here as I am expecting recession to start by ending 2016.

    I have 2 FD’s & OD is (TD + 2 %) is available for 90%
    21 L ( Mother Senior Citizen @8.93 Monthly Rs.15000/- )
    12 L ( Wife Normal @8.14 Monthly Rs. 8000/-) .

    I am a co owner in both bank account and FD’s .

    Both Mother & Daughter In Law has NO Other source of income other then Interest Income and Banks don’t consider this income for Home Loans.

    I have to compulsorily become co applicant wherein all regular EMI’s would be flowing out from my bank accounts.

    I was planning to use 80% of value from Wife’s FD & then the remaining from Mother FD (so Interest Recd V/s Interest Paid = 0 on monthly basis).

    I also want to close Outstanding within 60 – 96 months which is not possible if I opt from Home Loan looking at my Monthly Income.

    From taxsaving point I am already investing in MF’s & Other schemes.

    Please let me know if taking 25-27 L OD Loan would be feasible or taking a Home Loan under both scenarios considering under construction OR ready to move basis.

    Thanks & Regards,

  5. Mohsin says:

    I have a home loan of 36 L with an Emi.of 40000 ever month for 15 yrs. I have the 1 yr of my loan. I was an Nri left my job and now in Ind. I have some saving say approx 30 L. What do i do invest in fd or pay off partial or full loan or mutual fund (no idea abot mf) what do i do, plz advice.

  6. subin p gopal says:

    hai ,
    i have question that in my fd there is 10 lakh and i want to make certain alteration to my house ,for this it should need 8 lakhs and i have earning of 40 thousand per month ..what is better idea ?
    1 . to take home loan
    2. to take loan from fixed deposit.
    3 use the fixed deposit amount.
    i am working abroad
    kind regards

  7. ashalanshu says:

    Dear Narbhavi, if the property in question is going to be self occupied, what benefit ‘ll you derive from higher price?



  8. ashalanshu says:

    Dear Narbhavi, why do you want to invest in this property at all?



    1. narbhavi76 says:


      Its my dream to live in my own house, moreover my son can enjoy the property after my period. He is not strong enough (economically) to buy a property. Moreover I hope the property value will go up in future.


  9. narbhavi76 says:

    Dear Gurus,
    I have around 40 lakhs Fixed deposit and getting monthly interest. I would like to buy a flat which is cost 35 lakhs including stamp duty. Instead of paying lump sum of 35 lakhs, is it good idea to borrow a loan against my FD, and pay the interest from my interest.
    I am retired senior citizen, your advise will be more valuable to me.
    The banker is ready to give Loan against my FD.
    Kind regards

  10. ashalanshu says:

    Dear Dinesh, how can you reduce your tax outgo on FD interest? Both these house ‘ll be self occupied or rented?

    Please clarify.



  11. dineshkummar says:

    Hi ,
    My question as below :
    (1) How to reduce/minimal the tax from my FD interest ?
    (2) In which ratio I can buy house (means) 1:2 (FD Amount : Houses) ?
    (3) I don’t want to use any of other income to my house loan, so for this what is best option I can use to buy house ?
    Thanks in Advance,
    S. Dhinesh Kumar

  12. dineshkummar says:

    I have 60 Lacs in FD, I am planning to buy two houses for 26lac & 26 Lacs. Please suggest me how can I go, I dont want to pay the 52 lacs at one shot….Guys need your advice
    S. dhinesh Kumar

    1. I am not sure what you need here .. you want to buy 52 lacs worth of house (2 houses of 26 lacs each) and at the same time you do not want to pay 52 lacs also , how is it possible ? The only option is to take the loan in that case !

  13. ashalanshu says:

    Dear Sam, you are always welcome. Please feel free to ask in future also.



  14. Sameer B Bhodia says:

    Thanks Ashlanshu,

    Your advise is precise, I would prefer to pay of partial loan which will get me & my family a bit tension free. There is no income stability due to fluctuating markets hence if pressure would be low, I can dare to think something different, something out of box & may earn more than present.

    Thanks once again.

    – Sam

  15. ashalanshu says:

    Dear Sam, your question has two parts. One is financial one. Other is Emotional one. Financial one – Invest in FD or any other instrument where you can earn better return.

    Emotional part – please pay out the partial loan.

    Now it’s upto you to decide which part is important to you. 🙂



  16. Sameer B Bhodia says:

    Hi All,

    Need some advise please..

    I’ve taken a housing loan in the year 2006 of Rs. 12 lacs for 20 years. Its been 7 years & I’ve been paying my EMI’s properly.

    Monthly EMI is Rs. 11040/-

    Fluctuating interest rate @ 9.50% (being Nationalized Bank interest doesnt fluctuate more, it remains near the same only)

    Today my Housing loans still stands at Rs. 10 lacs + something.

    I’ve saved certain amount & wish to pay off approx 3.5 lacs out of total Rs. 10 lacs to reduce the loan burden, however one of my friend advises me “”Not to pay in Housing Loan but Invest in a Fixed Deposit. Only continue paying EMI’s as actual””

    Can someone please advise how it would be beneficial?



  17. Kapil Malhotra says:

    Well, I had a different idea altogether then.

    I’ll try to explain using the Jagoinvestor calculators. (http://jagoinvestor.dev.diginnovators.site/calculator).

    If I use the, “Future Value Calculator (One Time)” and for 1 lakh as an investment at 9.25% for 20 yrs, I get Rs.586717/- as future value.

    And, now, if I use the “EMI Calculator” for the same amount and tenure at 11% interest, the total amount that I pay comes out to Rs.247680/- [and that too in EMIs of Rs.1032/- only].

    The results are astonishing indeed. And, I believe it answers Prashant query.

    1. Dear Kapil, the difference in the 2 figures is coming from the positive & negative compounding. In case of 1L Rs. invested @ 9.25% & kept in compounding, the interest ‘ll earn interest on it & keep on so. But in case of same 1L Rs. taken as loan, we are paying back every month & accordingly, the interest outgo is coming down which you can say negative compounding.



      1. Kapil Malhotra says:

        Thanks Ashal. That’s precisely what’s happening.

        Considering this, won’t you suggest that continue with the FD @ 9.25% and go ahead with the loan @ 11%, rather than discontinuing the FD and using it as a lump sum for property.?

        Looking forward for your opinion.

        Also as Manish said – “Why are you not using the FD to pay off a part of loan ? Will you get more returns in FD than what you pay in Loan ?”

        I would also request his opinion as I disagree here. It seems I am missing something here.

        1. Dear Kapil, in the prev. reply I said the possible loan amount ‘ll be 32L Rs. The EMI for the same ‘ll be 33030 Rs. for a 20Y term. Out of which initially around 3700 Rs. ‘ll be the principal part & balance ‘ll be the interest part. Which is around 29300 Rs.

          On the other hand, the qtly interest from those 15L Rs. ‘ll be around 34687 Rs. which translates into mly figure of around 11562.

          Now If I assume that the interest of FD is not used for compounding but for payment towards those EMI, the person in question has to pay around 21500 Rs. from his own pocket. & it’s only after 194 months into loan out of 240 months total period, that the interest on home loan is equal or less than this mly interest on FD but loan is still on & it ‘ll complete only in 240 months. As there was no compounding of interest in this case, the FD maturity value ‘ll remain 15L Rs.

          Now If I the person opts to liquidate FD in favor of Loan just now, the loan value ‘ll come down from 32L to 17L Rs. the EMI of the same ‘ll be 17547 Rs. for same 11% ROI & 20Y Term. Now in the 32L Rs. loan, the person is to pay 21500 Rs. from his own sources. If same 21500 Rs. are paid in this 17L Rs. loan, the loan ‘ll be over in 143 months time or almost 12Y. that’s a saving of 97 months.

          Now for next 97 months, if the same EMI of 21500 Rs. is invested in a mly RD of earning a yly ROI of 6% only, hold your breadth, the maturity value after 97 months ‘ll be almost 2689000 Rs. If you change that 6% ROI even by 1% to make it 7%, the maturity amount ‘ll be 2810000.



  18. Prashant says:

    Dear Ashal,


    The house cost is total Rs 40L everything included.

    I do not want to use the FD completely, as need liquid money for family exigencies.

    Will re-think my decision.

    Best regards,

    1. Dear Prashant, @ 20:80 Ratio, you ‘ll get around 32L Rs. as loan. @ 11% ROI, the EMI amount is 33030 Rs.

      Please do check with HDFC Bank, what ‘ll be the ROI for loan against that FD?



  19. Prashant says:

    Dear Ashal,

    9.25 percent is before tax,it would be lesser due to taxation approx 8 percent, thanks, Prashant.

    1. Dear Prashant, paying around 11% in home loan & earning 8% in FD, is ‘NOT A GOOD IDEA SIRJI.’ You are loosing 3% directly.

      By the way, what ‘ll be the final cost of the house? is it 40L or more due to addition of stamp duty & other charges?



  20. Prashant Gangwal says:

    Thanks for the responses.

    @ Manish – My returns in FD is max 9.25% while loan rate will be around 11%.

    @ Ashal – My FD is with HDFC bank.

    @ Parag – I want to keep FD as family security and take loan on this secured FD. I understand that this option is extended by the bank where the borrower can take loan over the secure FD.

    1. Dear Prashant, is it really 9.25% from that FD or less due to taxation. please check & confirm.



  21. parag says:

    I agree with @Manish, this is like a no-brainer. Why have FD at all if you are going to take loan unless it’s for a security buffer for your family. If it’s for security, then why take loan on that secured FD ?

  22. Dear Prashant, is the FD with HDFC the home loan provider or HDFC Bank? As both are independent institutions. Please confirm.



  23. Why are you not using the FD to pay off a part of loan ? Will you get more returns in FD than what you pay in Loan ?

    1. ileanalyardson says:

      Yes, you can borrow against the fixed deposit, without breaking it. Since you already have a fixed deposit
      with HDFC bank it is better to take a loan from the same bank. One of the advantages of borrowing against
      FD from the same bank is that the interest rates are lower. You can talk to your HDFC bank executive for
      more details.

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