The COVID times have made it difficult to
avail the funds from banks or non-banking financial institutions, especially
for loan products such as a home loan. It is because the lending institutions
are themselves coping up with liquidity challenges and are thus reluctant to
provide borrowers home loans. However, a mortgage guarantee loan can indeed
tackle your issue of getting finance if you are facing one.
Let’s understand what a mortgage
guarantee home loan is :
What is a mortgage
guarantee home loan?
A mortgage guarantee home loan is the
home loan in which lending institutions avail the credit guarantee from the
borrowers to manage the credit risk in case the borrower defaults. The
borrowers need to pay a one-time fee which varies based on his credit profile
for every lending institution.
Now, how does this work?
Consider, a borrower has availed a
mortgage guarantee home loan worth Rs. 50 lakhs. Firstly, to avail of such home
loans, the borrower needs to pay a specific fee, which may range from 1%-2% of
the home loans. Now, in case the borrower is unable to repay the home loan and
subsequently turns into a Non-Performing Asset. So, in this case, the financial
institution will invoke the mortgage guarantee as per the guidelines of Reserve
Bank of India. Thus, India Mortgage Guarantee Corporation (IMGC) will bear the
loss of Home Loan depending on the percentage of mortgage guarantee as per the
agreement.
Do you need to pay this
amount?
While IMGC pays a certain amount of the
home loan, the borrower still needs to pay the home loan EMI along with this
loss borne. If he/she fails to repay the home loan, then the lender has the
right to auction the mortgaged property and recover the full amount. Along with
that, it will poorly affect the credit score of the borrower if they turn into
default.
So, how does a mortgage
guarantee home loans beneficial for the borrowers?
One of the most significant benefits of a
mortgage guarantee home loan is that the lending institutions will process your
home loan application faster. Also, it would provide you home loans at better
terms with better eligibility, higher loan amounts etc.
How can you get mortgage
guarantee home loans?
Not all banks and non-banking financial
institutions provide mortgage home loans. If you have applied for home loans
with the lending institutions that provide these loans, then they would
recommend you about the same.
Some banks that provide
mortgage guarantee home loans are listed below:
●
State Bank of India (SBI)
●
Axis Bank
●
ICICI Bank
●
Bank of Baroda
●
LIC Housing Finance
●
Tata Capital
●
Shriram Housing
Finance
Other things you should
know about mortgage guarantee home loans:
1.
There are additional costs that you may have to bear on
mortgage guarantee home loans which are solely dependent on various factors
such as your credit profile, CIBIL Score, Sources of Income etc.
2.
For availing a mortgage guarantee home loans, you do not need
to submit any additional documents. The documents required for such home loans
are similar to home loan documents for a home loan without such guarantee.
3.
Also, the mortgage guarantee home loans are different from
mortgage-linked life insurance, where the amount is borne in the case of
unforeseen events such as the death of the borrower.
4.
These loans can reduce your dependency on other sources of
finance as you can get home loans of higher values.
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