ICICI Bank Launches Guarantee-Backed Extra Home Loan

Published on: Aug 27, 2015 @ 15:54

ICICI Bank  on  Wednesday  has  launched  a  unique  and  the  country’s  first  home  loan product backed  with  a guarantee  that  will  allow  borrowers  to  avail  higher  loan  amount and  also longer  repayment  tenure.  The consumers  who  have  not  managed  to  buy  a house until  middle age  can  now  avail  a  long-term  home  loan with the  introduction  of “ICICI Bank  Extra  Home Loan”  scheme  for  the  segment.

This  product  will  be  a  mortgaged  guarantee-backed  home  loan  that  will  allow  borrower  an increase borrowing by  20  per  cent  and  even  stretch  repayment  tenure  up  to  67  years  of age. Generally,  banks  do  not allow  home loan  tenures  beyond  60  years  of  age,  but  ICICI Bank’s ‘Extra  Home  Loan’  will  allow  loans  that are  repayable up  to  67  years  of  age. To cover  the risk  for  the  incremental  amount,  above  the  maximum  loan limit, ICICI Bank  has tied  up  with he  newly  promoted  India  Mortgage  Guarantee  Corporation  (IMGC),  which will guarantee  the repayment  of the  loan.

However,  the  maximum  loan  to  property  value  can  not  go  beyond  the  prescribed  80  per cent,  according  to the  Reserve  Bank  of  India’s  norms.  The  borrower  will  have  to  pay  an upfront  fee  of  1-2  per  cent  for  the enhancement  which  would  depend  on  the  loan  amount, borrower’s  profile  and  income. The  fee  is  the     insurance  premium  for  the  extra  loan amount,  which  is  provided  by  IMGC .  The  maximum  loan  amount under  this  scheme  would be  Rs 75 lakh.  The  rate  of  interest  charged  from  the  borrowers  will  remain  the same  as other home  loans  and  the  EMI  will  also  not  change.

If  on  the  basis  of  your  age,  income  and  other  eligibility  criteria,  there  is  a  difference  in  the loan  amount you need  and  the  amount  sanctioned  by  the  bank, then  the  ICICI Bank  Extra home  loan  scheme  can  help  in meeting  the  shortfall  for  a  fee.

For  example,  if  a  consumer  wishes  to  borrow  for  purchase  of  a  house  and  needs  a  home loan  of  Rs 60 lakh wherein  the  LTV  works  out  to  Rs 75 lakh  but  the  bank  sanctions  only Rs 50 lakh  as  per  his  eligibility. Under ICICI Bank  Extra  Home  Loan  scheme,  the  borrower can avail  a  higher  loan  of  Rs 60 lakh  by  enhancing  his eligibility  up  to  20%.  The  borrower also has  the  option  of  increasing  the  repayment  period  as  well. However, for  this  extra amount  of Rs 10 lakh  the  borrower  will  have  to  pay  a  fee.

The  enhanced  amount  of  up  to  20  per  cent  is  guaranteed  by  IMGC,  which  essentially  takes the  risk  off ICICI Bank’s  books.  Since  the  risk  for  the  additional  home  loan  would  be borne by  IMGC,  it  would  not impact  the bank’s  books, said  Chanda  Kochhar, Managing Director and Chief  Executive  Officer  of  ICICI Bank.

ICICI Bank’s  home  loan  interest  rate  up  to  Rs 75 lakh  varies  between  9.85  per  cent  and 10.05  per  cent.  On the  other  hand,  the  interest  rate  for  a  personal  loan  can  vary  between 12.99  per  cent  and  20  per cent.  The Extra  Home  Loan  may  work  out  cheaper.

This  product  targets  the  middle-aged  salary  customer,  the  first-time  home  loan  borrower  and the  self-employed  customer. The  product  is  suitable  for  someone  in  the  age  group  of  30-40 or  older,  because  at  that age  this  is  a  common  problem,  of  borrowers  looking  for  longer tenure  loans  but  being  constrained because banks  cannot  extend  the  tenure  due  to  the retirement  age  and  income.

Speaking  at  the  launch  of  the  scheme, Chanda  Kochhar  said  that  the  size  of  the  home  loan industry  in  India is  Rs 9,70,000  crore  and  has  been  growing  at  15  per  cent  for  over  the last 10  years.  “The  housing sector  is of strategic  importance  to  any  economy.  It  is  the  key driver of  growth  with  linkages  to  a  number of  sectors,” she said.

To  begin  with,  ICICI Bank  Extra  Home  Loan  will  be  available  in  Greater  Mumbai,  the National  Capital Region  (NCR),  Bengaluru  and  Surat.  Subsequently, it  will  be  rolled  out across  the  other  cities  in  the  country.

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