It’s never too late to own your dream house. With home loan eligibility criterions getting broader and more flexible, even those nearing retirement or those who have already retired, can avail a home loan. Although these are secured loans, the uncertainty surrounding the life span and financial condition of senior citizens makes lenders apprehensive towards lending them.
However, borrowers in their 60s can get their home loan approved by keeping in mind the following points:
1. Are you eligible to take a home loan in your 60s?
Availing a home loan in your 60s isn’t as easy as when you are younger. However, some lenders do provide home loans to senior citizens, with the maximum age limit of borrower being up to 70 years at the end of loan tenure, implying that those aged 60 and above can get a home loan with maximum tenure of 10 years. This often leads to shorter loan tenures and lower loan amounts being granted to them, as compared to that of lower age groups.
Moreover, while evaluating a senior citizen’s loan application, lenders may prefer income sources such as rental income as the primary income, rather than pension.
To avail a home loan in your 60s, the below-mentioned tips can be helpful in your loan’s approval:
2. Boost your loan approval chances – Take a joint home loan
In your 60s, most lenders would be hesitant towards lending to you, largely due to uncertainty of life span and income constraints. This often leads to loan applications getting rejected. To boost the chances of your home loan application’s approval, consider opting for a joint home loan, preferably with an earning member (with stable income) as the co-applicant. Moreover, making a woman, like your wife or daughter, the first loan holder would attract lower interest rates.
Additionally, repayment capacity of the borrower and co-applicant are checked before the loan approval. Your FOIR (Fixed obligation to income ratio), i.e. proportion of your income already being paid out as credit card payments and loan EMIs, is a major player in adjudging your repayment capacity, along with income. Make sure your co-applicant’s FOIR isn’t more than 40-50% to improve your chances of home loan approval.
3. Avoid hurting your credit score – Check your loan eligibility before applying
Each time you apply for a loan, lenders pull out your credit score through your credit reports from credit bureaus, to check your credit profile. Such credit checks by lenders are known as hard enquiries, which may pull down your credit score by a few points.
While taking a loan in your 60s, even if you had been maintaining a good credit score and managing your credit cards and loan repayments in a disciplined manner, multiple loan applications can harm it. To avoid this, home loan borrowers should make use of online loan eligibility calculators and visit online marketplaces to check their eligibility and apply for a loan where their chances of getting approved are strong.
4. Make sure the EMI is affordable – Use online EMI calculator
Limited sources of income often make it difficult for those aged above 60 to attain a home loan. Presence of online home loan EMI calculators has highly benefitted many borrowers in calculating the exact EMIs according to the required loan amount, loan tenure and interest rates applicable. For retirees as well, online EMI calculator tool assists in planning their financial outflow upon taking the home loan. By using the calculator, borrowers can adjust the loan tenure as per the loan amount required and the interest rate, to arrive at an affordable EMI. Hence, this would prove to be helpful for senior citizens to prepare for the loan repayment in the form of EMI payout per month.
5. For smaller EMI payout and increased loan eligibility – Opt for lower Loan to value ratio
Loan to value (LTV) ratio is the proportion of house/property’s value financed by the lender in the form of loan. For instance, if the market value of the property is Rs 1 crore and the lender proposes to finance Rs 65 lakh, the LTV ratio would be 65%. Opting for a lower LTV ratio implies that the borrower would be required to fund a bigger part of the loan amount, resulting in lower loan amount required. A lower LTV ratio would also decrease the EMI amount, thereby increasing the loan eligibility of a senior citizen.
(By Naveen Kukreja, CEO & Co-founder, Paisabazaar.com)