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Can You Afford A Home Loan After Retirement?

Adhil Shetty

It is advised to take a home loan in the beginning of one’s career because of lesser financial commitments during this time. It is also considered a wise move since you can spread out the repayment over the next 15-20 years to make life simpler. While it is never too late to own your dream house, availing a home loan after retirement may appear to be a complex task. Lenders find it tough to provide loans to retirees since there is some uncertainty over repayments although borrowing is still possible.

Usually, lenders are reluctant to offer home loans to people above the age of 60. However, some lenders do consider providing home loans to people upto the age of 70 years after factoring in their income and credit scores. Loans are generally extended for a tenure of maximum 20 years and the amount doesn’t exceed 20 lakh. Since a home loan is a secured loan, the house being bought is taken as collateral.

To boost your chances of availing a loan after retirement, keep these crucial points in mind.

Have A Co-applicant To Improve Your Chances

Since procuring a home loan beyond the age of 60 is challenging, many times such applications face rejection. However, a co-applicant may come to your rescue, improving your chances of availing a loan while increasing your eligibility and loan amount availability. When looking for a co-applicant, it would be wise to have an earning member, who can also be your immediate family member. Since the responsibility of loan repayment is shared between more than one member, it increases the accountability factor for banks.

Keep Your Credit Score Healthy

How has your credit score been? This is a top priority for lenders before giving you a go-ahead for a loan. A credit score is a three-digit numeric expression that tells about an individual’s credit worthiness. Ideally, a score of 750 or above is considered a healthy figure to get a loan sanctioned at competitive rates. To maintain a healthy credit score, do not apply for a loan with multiple lenders as they will check your credit score each time by accessing your credit report. `This being considered a hard inquiry also has the potential to bring down your credit score by a few points. It would be wise to take the help of digital financial platforms to know your eligibility and choose a lender where chances of getting a loan are stronger.

Check If You Can Afford The EMIs

The financial marketplace is abuzz with Equated Monthly Instalment (EMI) calculators. Take help of one of these calculators from a reputed online financial platform to figure out if you can afford the EMI towards repaying the loan. This is crucial for you to have an exact idea about the EMI amount and also to assess your application’s success probability. Thus it is necessary to do a thorough research of the loan products available in the market and understand the EMI payout vis-à-vis interest rates and loan tenure.

Consider Using Your Investments As Collaterals For loan

You can also seek a loan by pledging your securities like equity shares, mutual funds, certain life insurance policies, National Savings Certificate (NSC), Kisan Vikas Patra(KVP) and Gold Deposit Certificates (GDC). Since the secured loan is backed by an asset, pledging such securities provide lenders an assurance about your loan repayment worthiness. This will allow a retiree to avail a home loan easily. However, do check about the terms and conditions for applying for a loan against these securities.

Go For A Lower Loan To Value (LTV) Ratio

LTV or Loan to Value Ratio is the ratio of a home loan amount to the market value of the property that is going to be bought with the loan. In simple terms, it is a measure or standard through which the risk of a loan is measured. It helps a lender to not lend beyond the actual price of the property. A higher LTV means a higher chance of borrower defaulting. For example, the property you are buying is valued at Rs. 1 crore, and you get a home loan of Rs. 75 lakh from the lender, the LTV ratio, in this case, would be 75%. So, if you will opt for a lower LTV, it will not only improve your eligibility but also reduce the EMI burden. However, that also means that you’ll have to increase your down payment contribution.

So, it may be slightly difficult to fetch a loan for retirees, however, it is not an impossible task. Keep these points in mind to make it a smooth process for yourself.