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.
Ajay Verma, founder, and writer of The Housing World, a real estate and mortgage news website. He has over fifteen years of rich experience in the above-mentioned industries.