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Home Loans for Senior Citizens: Things to Know

Owning a home is a dream for everyone, including senior citizens. It is never too late to purchase your own home, and if you are a senior citizen and feel like the options are running out for you on the home loan front, fret not.

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Though lenders usually think twice and some may also avoid granting loans to senior citizens due to the age and income factor, pensioners are also eligible to apply for home loans provided they meet certain conditions. Most pensioners or retirees are not aware of the loan options they can avail. New home loan schemes are being launched in the market, especially for those above 60, and many banks are also coming out with attractive offers to make that dream of owning a home come true for senior citizens. In this article, we will bust some myths about home loans for senior citizens and understand more about how to make the home loan application process a smooth ride.

To put things in perspective, it is first wise to look into some of the major obstacles faced by senior citizens when it comes to applying for a home loan. Firstly, one of  main reasons why seniors citizens are denied a home loan is the age factor. Banks feel that due to this and the fact that they depend on pension, will not make them an ideal candidate. Lenders feel that senior citizens might not be able to cope up with paying Equated Monthly Installments (EMIs) since the pension amount is much lesser than the salary drawn. This greatly slims down the chances of getting a loan but does not make loan approval impossible. There are also a lot of myths and misconceptions when it comes to loans for senior citizens. Let us bust some of them.

Myth 1: Banks usually do not approve home loans for senior citizens

This is not always the case. Retirement does reduce the chances of getting a loan approval but if the applicant has in place necessary documents and meets all the conditions, then it is still possible to get a loan. Even those above 60 are eligible for home loan schemes. In fact, there are many banks that are coming out with special housing loan schemes especially for senior citizens. For example, a well-known financial services company has come out with a scheme that grants home loans only to pensioners. To become eligible the applicant must be above 60, drawing a regular pension and should be able to provide the borrower a statement of financial assets.

Another well established bank in India is also providing a unique housing loan scheme for pensioners. The loan will be granted to anyone above 60 for the construction of a house, purchase of constructed home or flat. The repayment period is 15 years

Myth 2: The loan amount granted to retired senior citizens will be less than non-retired persons

Though it is true because the loan amount granted is determined by the pension, this depends from bank to bank. This is also because the loan limit is basically calculated depending on the income of a person. However, the applicant can provide his other income statements in the form of investments, real estate, etc, to show the bank, he/she is capable of paying back the loan. These investments can also be used to make a request for a higher loan amount.

 

Myth 3: It is always better for a senior citizen to opt for a shorter tenure

In most cases, lenders prefer that the loan tenure is set in such a way that it can be cleared by the time the applicant turns 75. So, if you are 60 at present, you can still take a loan with a tenure of 15 years. However, if possible try to reduce the loan tenure as much as possible as this will greatly increase the chances of loan approval.

There are many strategies that can be adopted to increase the chances of loan approval. Also, a person is not always granted a loan just because he/she is earning a certain income. There are many factors that come into play such a credit score, ability to provide collateral, etc.

Let us take a look at how a senior citizen can improve his/her chances of getting a home loan approval:

Spousal income will help: If one spouse is retired and the other is working, this may prove advantageous. In this case, the earning member can be the main applicant and the other person can be the second applicant for a joint loan. This will greatly increase the chances of loan approval.

 

Show rent as income: It is also a wise idea to show rental income as a supplementary form of income as this will help the applicant prove to the bank that he/she is capable of paying back the home loan. The applicant can also show other types of supplementary income.

 

Ask your kids to be a co-applicant: A senior citizen can always ask his/her child to become a co-applicant. This is one of the best ways to improve loan eligibility because the age of the son/daughter will be lesser and this will also add to the income level. This will make lenders more confident and consequently lead to a faster home loan approval.

 

Give collateral: It is important to choose the most high yielding investments in your kitty and provide the same as collateral for loan. This is an effective way to increase loan eligibility for those who are above 60 as it provides the bank a certain guarantee of the payback ability of the applicant.

If you are a senior citizen looking to make that dream home purchase, do make sure you fit into all these parameters, if not, follow these tips to get one step closer to making your dream of buying a home come true. Another trend that is catching up in India is the reverse mortgage loan scheme. This is a scheme where a borrower can pledge his/her property to get regular income from the same in the form of annuity.


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