Housing finance companies have come up with new, lucrative deal for people looking to apply for home loan. If you opt for home insurance simultaneously with the home loan, you can get the benefit of half a per cent cut in home loan rate.
Buying a home insurance is equally important as owning a house. The property insurance, in general, safeguards probable financial losses caused due to earthquake, act of terrorism, flooding, accidental fire, and other natural disasters. Hence, the regulator of housing-finance companies – National Housing Bank (NHB) is in discussion with Insurance Institute of India on the agenda of reducing home loan rate for borrowers buying home insurance from the same company.
Sometimes the financial institutions compel their customers to acquire the insurance for their properties, which is alleged. However, the customers are looking for home cover with cheap premium and high coverage.
Reduction by 50 bps (basis points) in home loan rate is what has been decided so far. However, the exercise is not over yet and final conclusion is yet to be drawn. In the meanwhile, NHB is in process of conducting a survey where they will measure the feasibility of property insurance.
To other side of the coin, NHB is looking forward to Insurance Institute of India to offer low home insurance premium which the lenders can pass down to the consumers.
As per ICRA (a credit rating agency) estimation, currently, an EMI of ₹874 is being paid by a retail borrower at 8.6% interest on ₹1 Lakh loan taken for 20 years. If the rate will be cut by 50 bps, the borrower will be paying ₹842 for the same loan for the same duration.
These measures, if approved and implemented, will be of benefit to the borrowers in improving their risk profile, and expanding their loan eligibility through lower rates and more credit. Home insurance premium, in any case, will be payable by the borrower but the rate, as compared to the higher rates, will be nominal.
Offering a property insurance to the customers acquiring loan for buying a home is a common practice being performed by various insurance institutes these days. The name includes HDFC, the largest mortgage lender, which offers a non-life property insurance called – “HDFC Ergo,” and DHFL (Dewan Housing Finance Corp. Ltd.) which offers Cholamandalam MS General Insurance products through its branches.