When it comes to buying your own home, it is never too late. Most people prefer to purchase a home when they believe that they have adequate funds to do so and when they can afford the monthly EMIs. While home loans were earlier made available only to individuals who could demonstrate a monthly salary and employment, lenders today have become more and more flexible in that they are providing home loans even to retired individuals. Whether you are nearing retirement, or have already retired, you too can purchase your dream home by taking a home loan. Here are a few tips to keep in mind about home loan for retired persons.
You need to check your eligibility: While banks, housing finance companies and non-banking finance companies (NBFCs) do offer loans to seniors and retired people, you need to be eligible for the loan. Lenders do provide home loans for retired people and senior citizens but the maximum age of the borrower at the end of the loan tenure cannot exceed 70 years or in some rare cases, 75 years. This means that if you take a home loan in your 60’s, you can definitely expect a shorter loan tenures. Also, when lenders determine the home loan eligibility for retired persons, they ask applicants to present their income sources. They would consider any income derived from renting other properties as your primary income as opposed to your monthly pension/income from fixed deposits etc.
Multiple loan applications and rejections can hurt your credit scores: A common mistake seniors tend to make is approaching various lenders at the same time before knowing their credit scores, in the hope that one will consider the loan application. But if multiple lenders reject your loan application, your credit report gets massively affected. If you have a low credit score, your home loan application can be rejected. It basically shows potential lenders that you are not creditworthy. So instead of making multiple applications, it is better to clear off your debts, use online eligibility tool calculators to check your loan eligibility and then apply for the loan.
Your loan eligibility is boosted if you take a joint home loan: The problem with taking a home loan for retired persons is that lenders are often hesitant to provide loans due to uncertainties regarding the borrower’s income and life span. But if you apply for a home loan with another applicant, preferably a younger family member; one who draws a steady monthly income; the chances of your loan being approved can increase drastically. You could also list your wife or daughter as a co-applicant on the loan to benefits from a lower interest rate. Remember that the lender considers your repayment capacity before approving the loan so if you list a co-applicant you can show another individual with an income, thus strengthening your case.
You should use a home loan EMI calculator: A home loan EMI calculator is a freely available online tool that helps you understand the EMI you would pay on your home loan even before you approach a lender. You just need to insert the principal loan amount you’d require, the interest rate you can afford and the loan tenure as per eligibility and the tool will compute the payable EMI. You can keep using various permutations and combinations of loan tenure and interest rates until you arrive at an affordable EMI. You can accurately predict the payable EMIs with the help of the EMI calculator.
Opting for a lower LTV ratio can strengthen your case: Retired people and senior citizens applying for home loans can get their loans approved if they opt for a lower loan to value (LTV) Ratio. This simply means that if you make a higher down payment, you are taking on a smaller amount loan. Most young borrowers typically opt for 80% finance and pay 20% as down payment. But seniors can increase the down payment amount and reduce the principal loan amount. Furthermore, your monthly EMI payout can also reduce tremendously if you opt for lower LTV ratios. This can increase your loan eligibility considerably and your loan could be approved faster.
As you can see from the above points, it is not impossible for retired people and senior citizens to get a home loan nowadays. As long as you follow the home loan eligibility for retired person criteria and keep the above-mentioned tips in mind while applying for the loan, your loan can be easily approved.