Buying a home requires financial assistance. Most of the Indians belong to Middle Income Group and their savings are not sufficient to dedicate them completely to the cause of home buying. This is why; they need financial push. Thankfully, there are dozens of home loan providing companies in India that offer easy loans to the home seekers. A home loan is usually taken for a very long period of time, the maximum time period being 30 years. Banks have decided different loan terms as per their policies. These terms vary, mostly, depending upon the earning status of the borrowers. So, when a senior citizen loan scheme is designed, one needs to design it keeping the factors of age and financial condition in mind to help loans for senior citizens.
Loan to pensioners was not available, till quite recently due to many uncertainties, most important of those are:
- Senior citizen’s age and impending life span, and
- Income
But with banks and financial institutions going a bit flexible, certain loans for senior citizens schemes have been rolled out. These schemes allow the senior citizens to pitch in other savings apart from pension to become eligible for home loans.
Listed here are a few ways using which senior citizens can apply for home loans without facing rejection:
- Apply jointly with an earning co-applicant: The chances of senior citizens being granted a home loan increases when the loan is applied for jointly with an earning co-applicant. In such case, both the co-applicant and the senior citizen can get tax benefits under relevant sections when they also choose to co-own the property.
- Apply for home loan with one financial institution only: There is a tendency of applying for loans from various financial institutions simultaneously. The borrowers do so thinking this makes their chances of getting a home loan brighter; but, the fact is that it actually works against them. The credit score gets hit badly when the loan is applied simultaneously with a number of financial institutions. Thus, the better way is to do the ground work in advance. Make comparisons amongst all plans available, enquire deeply and elaborately on all aspects and then pick the option that suits your loan requirements to the best.
- Keeping collateral: There are certain equity shares and mutual funds that offer very high interest rates. If you as an investor have made substantial corpus that can set off the liability of the home loan, you can keep them as collateral with the bank to get the home loan application approved rather quickly.
- Opt for lower LTV (loan to value) ratio: LTV stands for loan to value ratio. This means that loan to be availed in comparison to the value of the house to be purchased is low. The biggest problem faced in availing home loan is that of managing EMIs. So, if the loan required as compared to the value of the house is low, it attracts small EMI value. Thus, it is better to depend less on loan and use savings to buy house to manage the monthly expenses after retirement.
How can senior citizens ensure paying EMIs without fail
Banks have come up with loans for senior citizens schemes. But, the onus lies on the borrower to make the best of the opportunity and not to fall prey to vicious cycle of unending liability. Therefore, here are some of the tips senior borrowers can follow to turn senior citizen loan scheme in their favor.
- Choose senior citizen loan interest rate wisely: Home loan interest rates can be fixed as well as floating type. It is worth understanding that the interest rate fluctuates with the banks’ policies and market conditions. If the situations in the country indicate less stability in the interest rates, the borrower should go for floating type interest repayment plan of loans for senior citizens. This helps borrowers enjoy lower payment liability when the rate lowers down.
- Use EMI calculator to compare all loans: There are a number of EMI calculators available online and also in the form of mobile applications. These tools are helpful in calculating and comparing the EMI structures of various loan providing companies. When the senior citizens pick the plan that is best affordable by them, they can live with a better peace of mind without putting the creditworthiness on stake.
- Pick the tenure that is practical: Time is a big hurdle for senior citizens to get the home loan. The tenure should be short enough to ensure that EMI value does not exceed the affordable limit. Also, the tenure should not be too long either. Ideal tenure size lies between 8-10 years. It is even shorter if the borrower is 75 years or above.
Certain important figures worth considering while applying home loans for senior citizens
- Age: It is better to plan on taking the home loan at the age of 55 to 60 years. This allows the borrower to have a loan term of about 15 years long.
- Loan size: Loan size of 40% of home value is good enough to make EMI affordable. The maximum amount should be 25 lakhs repayable in the span of 15 years. Thus, the property for purchase should be chosen accordingly.
- Prepayment penalty: Some banks require borrowers to keep the loan at least for one year from the date of disbursement. Also, there should not be any penalty on prepayment. If at all the penalty is charged, it should be capped at 1% of the total loan amount.
Conclusion
A loan is granted easily to those individuals who can payback on time. This means creditworthiness is the biggest factor considered by a finance company. Before granting a loan, several other factors are also kept in mind. The amount that can be given on loan and repayment period is also taken into account to ascertain the feasibility of the deal. Lack of time and uncertainty of life, therefore, are two major drawbacks that senior citizens get to deal with, when they apply for home loan.
