How Your Home Loan Eligibility is Calculated

By | August 20, 2015

Applicant 4: A person nearing retirement

A person nearing retirement can usually go for a loan up to his retirement year. But if he has a pension lined up, he can get a loan until he turns 65 or 70, as in Mr. Sharma’s case. But, in case of extended tenure after retirement, the loan eligibility will be calculated on a flip calculation method. This means, he will be paying a higher EMI till the time he is in service, and a lower EMI thereafter. This is also called step down repayment.

Here the loan eligibility will be calculated in two steps:

First, by taking his income till the retirement period. For example, if Mr. Sharma has 5 more years to retire, first his eligibility will be calculated for 5 years. Then the eligibility post his retirement will be calculated separately based on his expected pension and the agreed tenure (5 or 10 years). His total loan eligibility will be the pre-retirement eligibility plus the post retirement eligibility.

But the FOIR will be taken only at 40%, to ensure that the combined loan amount shouldn’t be a toll on his monthly income at both, pre-retirement as well as post-retirement stage. The EMIs here will be scheduled in a different way, unlike usual home loans.

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