Life spans have increased in contemporary times because of better healthcare facilities. Forties are now considered the new 20s. Unlike in the past, people nowadays don’t dread to be in 40s and are prepared to take up life’s challenges mentally and financially. Home buying is one such financial move that many in 40s are opting for. Since home loan repayment is often staggered over 15-20 years, it’s advisable to take a home loan while starting your career since financial responsibilities are lesser. However, if planned well, taking a home loan even in your 40s is not a bad idea either. Here are a few pointers you need to keep in mind.
Work On Your Credit Score Before Applying For A Loan
Delaying your home buying decision till your 40s may prove to be beneficial as you may get enough time to build your credit score. Banks usually consider borrower’s credit score as one of the important factors while sanctioning a loan. If you have a credit card or any other loan in your name, ensure to make timely repayments to maintain a healthy credit score. It will also give you an edge in negotiating a good interest rate and a longer tenure with your lender. So before you apply for a loan, work on credit score to get the best deal.
Opt For A Joint Home Loan
When you are in your 40s, your financial commitments are enormous and so availability of funds is limited. While sanctioning a loan, a lender usually considers your income and repayment capacity. A joint home loan increases the chance of your loan being approved. If your spouse is still under is 40 and has a source of income, opt for a joint home loan. In case you have a child who is financially independent, you may also go for a loan with them as a co-borrower. This would not only fetch you longer tenures, but you will also have someone to share the debt burden with.
Choose The Lender Carefully
While there are many players available in the market to offer loans, you should choose your lender carefully after thorough research. Repaying a home loan is a long-term commitment so before zeroing in on a lender, understand the processing fees, repayment charges, penalties etc. It would also be wise to compare features of various loan offerings to fetch a good deal for yourself. Understand the terms and conditions of a loan before signing the documents.
Protect Yourself With A Home Loan Insurance
Life is unpredictable and so we should be prepared for any eventuality. If you are taking a home loan in your 40s, protect it with an insurance to secure your family’s future in case of your untimely demise or disability. In such a scenario, the insurance will take care of the remaining loan amount. You can also opt for Term Insurance, which can pay a sizeable corpus to the nominee in case the policyholder dies during the policy tenure. This will take care of all the financial needs of your family.
Lower Your EMI By Going For Larger Down Payment
If you have some surplus money in hand or some savings which you can use as down payment, try using it to reduce your loan amount, lowering your EMIs burden. However, while doing so, do not compromise on your important savings and investments that you have assigned for achieving other financial goals. It also makes sense to be prepared with a down payment plan once you decide to buy a house at this stage. Usually banks offer 80-85% of the market value of the property as loan and the rest 15-20% needs to be arranged for down payment. You may also liquidate some of your small savings that you can rebuild in near future.
Buying a home is a big decision at any stage. Before you take a call about taking a home loan, ensure you are financially well prepared to make the repayments.
The writer is CEO, BankBazaar.com