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Home / Money / Calculators /  Product crack | ICICI Bank’s Extraa Home Loans

Last week, ICICI Bank Ltd, the country’s largest private sector bank based on assets, launched Extraa Home Loans—a mortgage guarantee-backed loan.

WHAT DOES IT OFFER?

This home loan is targeted towards first time home buyers who are looking for a higher loan amount than they are eligible for when they apply for normal home loan and for longer tenor loan. Usually, one gets financing of up to 80% of the value of the property. You have to arrange for 20% of the value upfront and on your own. Apart from this, financial institutions also have a 60-year age limit for home loan-takers. In many cases, this limit doesn’t allow banks to offer the entire 80% financing of the value of the property. However, ICICI Bank’s product allows an older person to take a home loan as the bank has tied up with India Mortgage Guarantee Corp. (IMGC), a joint venture between National Housing Bank, International Finance Corp., US-based Genworth Financial Inc. and Asian Development Bank.

When the bank offers a higher loan amount, the extra amount gets covered by IMGC. This comes at a cost—you have to pay 1-2% of the loan amount as a fee. In case of a default, the one-time fee that you pay covers the risk to the extra amount and the bank gets protected to that amount in case of a default. Do remember that the borrower does not get any protection in case of default. If a borrower doesn’t pay the lender back, the bank can take over the property and auction it to recover dues. Apart from this, the bank will also get insurance from IMGC for the extra loan amount.

Currently, this product is available in four locations—Greater Mumbai, National Capital Region, Bengaluru and Surat. The maximum loan size is 75 lakh, and loan tenor is 30 years. But the age limit for a borrower is 67 years. So, if a 38-year-old takes this loan, her maximum loan tenor will be 29 years. But if a 50-year-old takes it, maximum loan tenor will be 17 years. All other charges such as for processing and stamp duty remain the same as bank’s other home loan products.

While calculating eligibility, the bank will look at your age, income and various other parameters. In case of a self-employed applicant, the bank will consider her higher seasonal income.

MINT MONEY TAKE

This home loan comes bundled with mortgage guarantee by IMGC. So, the bank is covered against default of the extra loan amount, and, in essence, the borrower pays for this coverage.

This product offers a bigger loan amount even if you are not eligible for it in normal cases and also a longer-term loan of up to 67 years. If the gap between the amount that you need to buy the house and loan amount is small, this product may be expensive. If the gap is big, this product can be suitable.

For instance, if the house is of 50 lakh, and you are able to get a normal home loan of 30 lakh and arrange 10 lakh on your own, you are still short of 10 lakh. So, if you go for this product, you will have to pay 80,000 as guarantee charge, assuming the maximum fee is 2%. If the gap was of just 2 lakh, the fee itself would be 80,000. If you take a loan after retirement, evaluate cash flow. It may not be a good idea to overburden yourself if you have other liabilities.

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