Mr. Subir Chatterjee does not own a home, but now, with retirement staring him in the face, he has decided to buy an apartment in Kolkata and settle down.
He was in a job that took him to different cities in India.
He was not sure where he would finally settle down after retirement.
Now that his son and daughter have settled into their lives, he thought of living in an apartment. He is fed up with changing homes every year.
“But is it possible to get a home loan at this age?” asked his wife, Suchandra.
He decided to discuss the matter with his son, a banker in a reputed private bank.
After talking to him, Mr. Chatterjee was assured of getting a home loan and the applicable conditions.
In the next couple of minutes, we will discuss how a senior citizen can buy a property with a home loan.
Let’s dive in.
Home Loan Options for Senior Citizens
Senior citizens can opt for any type of home loan/mortgage from the following. They are designed to meet different needs.
We will see how they work right now.
Regular home loan
A senior citizen can opt for a regular home loan where the borrower repays the amount in monthly EMIs. However, some special conditions apply to senior citizens.
We will discuss them in a moment.
Joint home loan
A senior citizen can apply with a working co-applicant (such as a child or spouse) to enhance eligibility and secure a longer loan tenure.
This increases the chance of approval and also reduces the EMI burden.
Loan against property (LAP)
Senior citizens who own property can pledge it to get a loan for any financial needs, including home purchase.
The loan amount is determined based on the property’s value. Repayment is easy on pocket as it is done through EMIs.
Reverse Mortgage
If a senior citizen owns a property but needs additional funds during retirement, a reverse mortgage can be a viable option. With a reverse mortgage, the borrower can convert a portion of the home’s equity into regular income or a lump sum amount.
This can provide financial flexibility to meet your needs without selling the property.
The loan is repaid when the property is sold after the borrower’s passing.
Eligibility Criteria
Senior citizens like Mr. Chatterjee need to fulfill somewhat different criteria for getting a home loan approved.
It is part of banks’ risk management policy.
However, meeting these requirements and obtaining a home loan is not particularly challenging.
Age limit: Senior citizens up to 70–75 years old at loan maturity can apply for home loans from the majority of banks. For some banks, the limit is lower.
Income source: Repayment ability must be proven using a pension, rental income, fixed deposits, or any other reliable source of income.
Employment status: Retired individuals can apply, but their chances of being accepted are increased if they have a co-applicant who has a reliable source of income, such as a working spouse or child.
A guarantor may also be requested by some banks. For the lender, a guarantor adds an extra degree of protection.
Credit Score: A high CIBIL score (often 700 or higher) increases the likelihood of loan approval.
Loan Tenure and EMI Calculation: Senior citizen loan periods are typically shorter. EMIs are higher for shorter tenures. In order to reduce risk, banks shorten the tenure. For example, a senior citizen might only receive a loan for 5-10 years, but a younger borrower might receive a loan for 20-30 years. Because of this, the EMI amount is comparatively high.
Loan amount and down payment: Banks may demand a greater down payment (20-40%) and restrict the loan amount based on repayment capacity.
The Difficulties and Their Solutions
There is no doubting the fact that senior citizens find it somewhat difficult to get a home loan. If you are a senior citizen borrower, here are some pointers to help you reach your objective.
Assess Your Financial Situation
It’s crucial to assess your financial status before applying for a home loan. Think about things like your assets, liabilities, monthly income, and spending. This evaluation will help you figure out how much you can afford to pay back and provide you with a clear picture of your affordability.
Additionally, create a detailed budget for buying the property of your choice based on affordability. Also, examine your savings and investments to check whether they can be utilized as collateral or as a down payment.
Repair Your Credit Score If Necessary
A higher credit score increases your chances of securing a home loan at favourable terms. Take steps to improve your credit score by paying off outstanding debts, maintaining a low credit utilisation ratio, and avoiding late payments.
Moreover, paying off outstanding loans and credit card dues reduces financial burden and improves the debt-to-income ratio, enhancing eligibility.
Arrange a Higher Down Payment
Having a sizable down payment can work in your favour when applying for a home loan after retirement. It demonstrates your financial discipline and reduces the overall loan amount. To increase your chances of getting your loan approved, try to offer at least 20% of the property’s value as a down payment.
Consider Loan Insurance
Loan insurance protects your family from repayment burdens in case of unforeseen events.
Choose the Right Lender
Compare different banks and financial institutions and select a lender that offers senior citizen-friendly home loan policies.
Consider Opting for Joint Ownership
Consider applying for the loan jointly with a younger family member who has a stable income. This can improve your chances of approval and potentially offer better loan terms.
The Final Words
Although there are some challenges in obtaining a home loan for senior citizens like Mr. Chatterjee, it is possible to overcome them with proper planning and financial awareness.
We hope this article will help you make your path easier to get a home loan. If you need further assistance, contact us today.
