Mortgage Guarantee is a credit default guarantee taken by mortgage lenders against borrower’s payment defaults. The mortgage guarantee becomes payable when a specified loan becomes non-performing. The intention of taking mortgage guarantee is to mitigate the risk taken by the lenders. This helps the lenders to explore alternate lending opportunities and loan products while transferring their home loan portfolio risk to Mortgage Guarantee Company (MGC).
Mortgage Guarantee is actively used by lenders in as a tool to help promote and advance home ownership. Considering the financial constraints of buying a house, MG product has been enabling lenders to provide higher loan amounts; thereby reducing the level of down payment required for purchasing a home.
Mortgage Guarantee is a credit guarantee for mortgage lenders and has provided a wide range of benefits to its acquirers like improved affordability for borrowers, risk sharing for lenders, improved standardization and overall improvement in hygiene. As India’s mortgage finance market expands, presence of mortgage guarantee will certainly be a boon for the industry.