Get a higher loan amount with mortgage guarantee


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A mortgage guarantee can help clients get a larger loan amount among many other benefits.

A mortgage guarantee can help clients get a larger loan amount among many other benefits. Shrikant Shrivastava, Chief Risk Officer, India Mortgage Guarantee Corporation in a conversation with Himali Patel, explains how mortgage security helps clients get a larger loan amount and negotiate better business terms with lenders.

What is mortgage guarantee and how does it help strengthen the housing finance segment?

Mortgage guarantees are in fact boosting the home financing segment. A mortgage guarantee is a financial product that compensates lending institutions or housing finance companies for losses that may arise when a homeowner does not pay off a mortgage. What a mortgage guarantee does is that it acts as a risk transfer tool. The risk of mortgage lending is transferred from the bank / housing finance company to the mortgage guarantee company and in this process helps mortgage lenders to penetrate deeper and more widely into the mortgage market.

In addition, mortgage guarantee products are seeing an increase in demand among banks and NBFCs. The main advantages of mortgage security are that it helps customers get a larger loan amount, negotiate better business terms with lenders, or move to bigger brands with better customer service and in many cases. case, to obtain the client a mortgage which had previously been refused by an official body. credit institution.

How do you reach the middle class and level 2 and 3 cities?

Our primary focus is on the affordable housing segment and this segment is in overwhelming demand, in various demographic and geographic segments. With the positive support of the government and the dissolution of demand and supply issues, this demand is sure to snowball in an important segment, if not the most important. The government is also giving the right impetus and a significantly large financial subsidy. Unfortunately, the granting of mortgages by banks and HFCs is very skewed in India. The top 12 states account for 90 percent of mortgage originations each year. Private lenders, banks and HFCs are even more asymmetric in their mounting, nearly 65% ​​of their total mounting takes place in the top 10 cities only

Which customer segments benefit from this product and how?

The mortgage guarantee supports the profiles of borrowers such as self-employed businessmen and also employees working with such companies, especially those of micro, small and medium enterprises. The self-employed and employees working with such small businesses are equal in population to borrowers in the formal employee segment, but they are largely underserved or unserved, especially by big banks and large HFCs, mainly for two reasons, higher default rates and the unavailability of documents to process their loan for the desired amount. The mortgage guarantee helps all these borrowers overcome these obstacles with ease. It provides lenders with a repayment guarantee by covering any loss resulting from a possible default and at the same time, through its personal discussion process, creates powers of attorney for the income of those borrowers which are well below the taxable threshold.

Who else can benefit when they get their mortgage with MG?

MG also supports two other borrower segments. Young borrowers compromise on choice of home or postpone purchasing decision due to loan amount eligibility issues. Loan eligibility increases when a borrower takes out a longer term loan as the monthly EMI becomes lower so that with the same income they can repay larger loan amounts. MG helps increase the affordability of loans by offering a full term of 30 years. Although a 30-year loan is offered by many lenders these days, but to qualify for the full 30-year term, the loan must be less than 30 years old at the time of applying for the loan. If he is 35 years old or say 38 years old at the time of the loan application, lenders normally reduce the 30 year loan from 5 to 8 years, that is, and give a loan term of 22 to 25 years. years.

With MG, lenders offer a 30-year term even when the borrower is up to 40 years old when applying for the loan. These young borrowers are also facing down payment problems due to lower savings, with higher loan amount with MG support the down payment and savings issue is also resolved and the EMI payment is also well within manageable limits for the borrower for the same level of income.

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