The Benefits of Mortgage Guarantee for the Lending Companies and Borrowers

Posted by Imgc India on June 14th, 2017

When lending companies provide home loans, they conduct extensive checks to understand the repayment capacity of the borrower. However, even after such thorough analysis, there are times when the borrowers may fail to repay the home loan, which is when the company is left with no choice but to bear the loss.

This is where Mortgage Guarantee comes into play to mitigate such risks for the lending companies, and also increase a borrower’s borrowing limit for a home loan.

For the Lending Companies

  • The credit protection offered by the Mortgage Guarantee Companies helps the lending companies to enhance their number of product offerings to benefit the customers. They are able to increase the loan repayment tenure, thereby reducing the EMI amount for the borrowers. This way, lending companies get to target a bigger pool of homebuyers.

  • The Mortgage Guarantee Company also helps lending companies manage the risk in a better way by improving their underwriting norms, as each loan guaranteed by a Mortgage Guarantee Company also goes through its own internal screening processes. The crucial insights derived from the analytics and performance trends of the contracts that are guaranteed by a Mortgage Guarantee Company, help the lending companies to better understand the portfolio’s performance, and improve their risk monitoring.


Further, the additional checks performed by the Mortgage Guarantee Company help the lending companies to improve their operational efficiency.

  • The Mortgage Guarantee Company helps the lending companies receive cash flows on delinquent contracts. Once a particular claim is filed and approved, the MGC starts making the payments of the EMIs on behalf of the borrower until the borrower becomes current on the EMIs. Thus, during the time when the customer fails to make the loan repayments, the Mortgage Guarantee Company helps in maintaining the proper cash flow for the lending company.

For the Borrowers

From a borrower’s perspective, this insurance of mortgage guarantee backed home loans is not just about better loan terms like higher loan amount, lower EMIs and longer repayment tenure; it is also about encouraging early home ownership.

Also, after the introduction of the PMAY, those belonging to LIG and EWS categories respectively are now eligible to get home loans. Now while this scheme is very beneficial, the lending companies are still prone to incurring huge losses because borrowers from this category often fail to repay the loans on time due to their unstable income sources. With the insurance of mortgage guarantee backed home loans, lending companies have been greatly relieved of this burden.

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Imgc India

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Imgc India
Joined: February 28th, 2017
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