It may be difficult for a senior citizen/pensioner to get a Home Loan, we agree. But here are a few tips to ease the process.
The answer, in a nutshell, is ‘yes’. Senior citizens can get a Home Loan but it isn’t going to be a cakewalk. Not that getting a Home Loan is easy for the younger lot. There are a lot of requirements and processes to follow before one gets their Home Loan approved.
Banks take into consideration a lot of factors before they approve a Home Loan application. Especially they look at the applicant’s age and income since these factors will help them gauge the repayment capacity of the borrower. This is also one of the reasons why it would be difficult for a senior citizen or pensioner to get a Home Loan easily. But, then again, it doesn’t mean that it is impossible for them to get a loan.
Additional Reading: Your Guide To The Home Loan Application Process
Let’s now discuss the difficulties that senior citizens face when applying for a Home Loan and the different ways they can get one:
Since pension is a limited amount as compared to monthly salary, it becomes difficult for lenders to figure out the repayment capability of the applicant. Banks, at the end of the day, provide loans on the basis of income.
Banks find it risky to extend loans to senior citizens also because there is uncertainty about the lifespan of the applicant. Besides this, the maximum tenure on Home Loans is 75 years of age. So, pensioners usually have very less time to service a loan, and therefore, their EMIs will be higher. And since banks have recovered their loan, they have to ensure that the senior applicant has the means to pay it back.
There is always a cap on the loan amount offered whether you are a senior citizen or not. However, in the case of senior citizens, the ceiling on the loan amount that lenders offer will be lower than that offered to the younger lot, mainly because of the reasons mentioned before.
In addition, senior applicants should be getting at least Rs. 5,000 monthly pension. The maximum age is 70 years in most cases and the repayment tenure is between 15 to 20 years. Plus, most lenders would prefer an earning relative to be the guarantor in case something unfortunate happens to the borrower.
Additional Reading: Instant Home Loans With No Paperwork
Anyway, problems aside, here are a few ways that can help pensioners get a Home Loan easily:
If a senior citizen applies for a loan along with an earning relative as co-applicant, then the chances of approval is higher. Also, if the co-applicant is a co-owner of the property, then both parties can avail tax deductions under Section 24 and Section 80C of the Income Tax Act.
Additional Reading: HRA And Home Loan: Can Both Be Claimed For Tax Deduction?
Collaterals, especially high-yielding ones such as Mutual Fund investments, can improve the chances of approval for senior applicants. Haven’t yet invested in Mutual Funds? It’s never too late. Invest now.
Of course, opting for a higher LTV (or loan-to-value) ratio means a higher loan amount and lesser down payment for an applicant. But, we’d advise pensioners to opt for a lower LTV. If a senior applicant chooses a lower LTV, it becomes easy for him/her to get the loan and repay the EMIs.
Additional Reading: Reverse mortgage, ideal for senior citizens?
A senior citizen applying for a Home Loan should avoid applying for too many loans in a short period of time. Too many applications can reduce the applicant’s Credit Score which would, in turn, reduce the chances of loan approval or increase the interest rate on the loan offered.
We’d suggest that senior applicants opt for online marketplaces which allows them to compare between different loans, check their eligibility and then apply for one. This would not only help them save a lot of time and effort, it would also help them get the best offer for themselves. Would you like to start you search now?