Get Higher Home Loan , pay lower EMI

Mortgage guarantee makes home loans accessible but it comes at a cost. Evaluate your ability to
repay before opting for it.

Last week LIC Housing Finance (LICHF) tied up with India Mortgage Guarantee Corporation (IMGC) to
offer longer tenure loans. LICHF will now offer loans to older customers till the age of 75. With an
enhanced tenure, borrowers will be able to take a higher loan amount, or may opt for a lower equated
monthly installment (EMI). All this become possible when a lender ties up with a mortgage guarantor.

What is mortgage guarantee?

Mortgage guarantee is a risk transfer tool. The risk of the home loan gets transferred from the
bank/housing finance company to the mortgage guarantee company. The house is the underlying
security in a home loan. If the lender is unable to recover the due amount by selling the house, it is
made good by IMGC.

Improved eligibility, higher loan amount:

The foremast advantage of mortgage guarantee is that it improves customer’s eligibility. Suppose that a
borrower with a relatively poor credit profile approaches a top-notch lender. Normally, the letter would
not approve of the loan. But with mortgage guarantee support it becomes willing to lend to this
customer. Such a borrower will not have to go to, say, a non-banking finance company (NBFC), which
would charge him a higher rate of interest.

With mortgage guarantee, lenders become prepared to enhance the loan amount by 20-30 percent.
Younger buyer often postpone the purchase of a house because the purchase of a house because they
lack the money for down payment. But in a mortgage guarantee product, they are able to get a higher
loan to value (LTC) ratio, subject to RBI limits. They do not have to rely on more expensive loans such as
personal, gold loan etc.

When people buy a home, finance get stretched for the first few years until income rises. But if the
lender is willing to offer a higher tenure, the EMI comes down, which makes things easier for the
borrower.

Mortgage guarantee can also improve older peoples’ access to credit. Most lenders prefer the loan
tenure to end at 60. Home loans are available for as long as 30 years. One would have to buy a house at
30 get a 30 year loan. But most people buy a house at a later age, and hence are eligible for a shorter-
tenure loan. With mortgage guarantee, lenders become willing to lend till beyond the retirement age. A
45-year old can, for instance, avail of at best a 15-year loan. This short tenure affects the loan amount
he is eligible for. His EMI also becomes intolerably high. LICHFL, for instance, earlier gave 20-year loans

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to people with pension income till the age of 70. With mortgage guarantee, it will now offer 30-year
loans until the age of 75.

With mortgage guarantee support, lenders also become willing to lend to salaried people working in the
SME sector, or with small time employers. Normally, they prefer to lend only to people working for
large, reputed organisations. IMGC has so far tied up with lenders like State bank of India, Axis, ICICI,
Bank of Baroda, Tata Capital, LIC Housing Finance, and so on.

Risk of moral hazard:

While improved access to credit is a positive development, one fear is that it could give rise to moral
hazard. One of the key causes of the 2008 financial crisis was lax under writing standards. Easy credit
can lead to an asset bubble. It can also lead to higher defaults later, which could in turn raise interest
rates within the sector as a whole.

Bear in mind the cost:

Customers should bear in mind that mortgage guarantee comes at a cost. Some lenders are currently
charging a one-time fee of about 1-1.5 percent of the loan amount. In future, some may pass it on in the
form of a higher interest rate, where it is not visible. While it is okay to pay a fee for a facility, you must
be aware of exactly how much you are paying.

There are other ways of avoiding the issue of limited eligibility for older borrowers. If a borrower is 50
years old and the banks says that it will lend to him only upto 60, one option available to him is to take
his son or younger brother as a co-borrower.

Check your repayment capacity:

Banks and housing finance companies may today be willing to lend a higher amount, or beyond 60,
based on mortgage guarantee. However, borrowers need to ask themselves whether they will be able to
service the loan.

Greetings from "RD Finance Services" 

RD Finance Services Deal in all type of loans

 
· Loan against property (LAP),

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 · Business Loan,
· Overdraft- Cash Credit,
· Loan against Rental Discounting,
· Home Loan,
· Personal Loan,
· Un-secured Loan.  
For more information, you can reach to me via @ or call
@https://rdfinanceservices.wordpress.com/9891235790 or connect via email
@delhireal009@gmail.com.
 
Now getting a loan is very quick and simple, just fill this 4 step application form fill it and revert back and
RD Finance Team is there to help you out.

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Thank you for continued patronage!
 
Best regards,
Rajesh Kumar
Mob.no. 9891235790
Email Id: delhireal009@gmail.com

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