When it comes to buying a home, it is easy to get a home loan when you are young. Lenders are more than happy to finance your dream home because they are confident that you have years of employment ahead of you and that your regular income can help you pay your EMIs seamlessly. However, as you get older, it becomes difficult to find finance for your dream home. That said, it is never too late to become a home owner. If you are a senior citizen and are ready to become a home owner, banks, non-banking finance companies and housing finance companies can help you fulfil your dream of owning a house. However, home loans for senior citizens come with certain conditions. Here’s what you need to know about taking a home loan in your sixties.
You need to check your eligibility: As we mentioned above, availing a home loan as a senior citizen isn’t as easy as when one is younger. Yet, there are lenders who are happy to provide home loans as long as the loan is repaid before the borrower turns 70 to 75 years old when the loan tenure ends. This simply means that if you are above the age of sixty when you apply for a home loan, then the maximum loan tenure provided by lenders is 10 to 15 years at best. Also, the loan amount granted to senior citizens is comparatively lower as compared to loan applicants belonging to lower age groups, whereas the EMI may be higher owing to shorter tenures. For instance, a lender may cap the loan amount to a maximum of ₹30 lakhs or approximately 50 times the monthly pension of the borrower, whichever is lower.
Your repayment capacity is examined: The lender may lay down certain condition towards loan repayment. For instance, a common condition on home loans for senior citizens is that the EMI be less than 40% of the borrower’s monthly pension. Another lender may prefer income sources such as a senior’s rental income (from another property) as the primary source of income as opposed to the monthly pension income. Lenders basically check the repayment capacity of both, the principal applicant and the co-applicant (if listed) before approving the loan. Both borrowers’ fixed obligation to income ratio or FOIR i.e. the proportion of income being paid towards credit card payments and other loan EMIs are considered. In case the FOIR exceeds 40% to 50%, the chances of loan approval can diminish.
Your credit scores are considered: Whenever you apply for a loan, the lender asks to see your credit scores. This is a basic formality that all lenders conduct before approving a loan. Each time you apply for a loan, and it is rejected, your credit scores are affected. Even if you have good credit score, are paying your credit card debt and other loans EMIs on time, multiple loan applications can harm your scores. In order to avoid hurting your credit scores, you must check if you are eligible for the home loan before applying. You can use online loan eligibility calculators and check your eligibility before applying for a home loan. This improves your chances of getting a loan without affecting your credit scores.
You can benefit from taking a joint home loan: Senior citizen home loans are often approved when they are taken as joint loans. Lenders are typically hesitant of lending to senior citizens owing to income constraints and the uncertainty of life span. When you take a joint home loan with an earning member of the family, who has a stable income and you list them as your co-applicant, the chances of your loan being approved increase. Also, you could consider making a female family member; your wife/daughter as the principal loan holder. This could result in the interest rates on the loan amount being lowered.
Consider a lower loan to value ratio: Home loans for senior citizens are often approved for individuals who choose a lower loan to value or LTV ratio. When you opt for a lower LTV ratio, you are basically opting to make a higher down-payment amount, and taking on a smaller amount as loan. LTV simply refers to the proportion of the house/property that is financed by the lender. For instance, most borrowers take 80% finance and make a down payment of 20%. Opting for a lower LTV ratio often increases your loan eligibility, especially in cases of senior citizen home loans