In a first in the extremely competitive home finance market, ICICI Bank, on Wednesday, launched a mortgage product backed with a guarantee to help the borrower avail more credit and also extended the tenure, for an upfront fee of 2% of the loan amount.
The new offering will help customers raise the eligible amount by up to 20% and increase the tenure by up to seven years, for an upfront fee of 2% of the new loan amount, managing director and chief executive Chanda Kochhar told reporters in Mumbai.
The product, which is popular in the west, is targeted at customers in the 40-plus age bracket as they are one of the largest segments of home buyers, executive director Rajiv Sabharwal said.
The product christened ICICI Bank Extraa Home Loans has been launched in association with the India Mortgage Guarantee Corporation (IMGC) and borrowers will have to pay a fee of up to 2% of the loan upfront to avail it.
"When you are paying a fee, you are getting a higher loan," Sabharwal said, when asked about a likely scenario where a home buyer is out of resources at command to pay the upfront fee.
He did not give an exact split of how the fee will be calculated but added that it will depend on the age of the borrower, extension in tenure, the nature of her income -- whether she is salaried or self-employed -- and the loan-to-value ratio.
Sabharwal also cited hypothetical cases, like one where a 47-year-old home loan seeker will have to pay Rs 70,000 as fees for getting his home loan amount stretched by Rs 5.5 lakh and the tenure by five years.
The risk for the incremental amount, above the maximum loan limit, which the bank is willing and allowed to lend, will be taken by the IMGC for which customer pays, he said, adding that ICICI Bank will not share the burden.
The rate of interest charged from the borrowers will remain the same as other home loans and the EMI will also not change, Sabharwal said, stating the product confirms with all the regulatory requirements including the loan to value ratio requirements.
The maximum loan amount under the product will be Rs 75 lakh, and the bank will initially launch it in Greater Mumbai, National Capital Region (NCR), Bengaluru and Surat.