Home loans are a great way for people to attain their lifelong dream of buying a house of their own. Sometimes, it can be a little late in life for such a dream to be within a person’s reach. In such a situation, it can be difficult for senior citizens to secure a home loan. This is because salaried professionals with healthy credit scores and a history of timely payments can easily get a home loan. On the other hand, senior citizens can find it difficult to secure a home loan.
Senior citizens, those more than 60 years of age, who often do not have a steady and regular income are not ideal candidates for a home loan in the eyes of a lender. Even if they can manage to get a home loan, senior citizens are often required to pay higher rates of interest, due to the low mortality of such applicants. However, despite these impediments, senior citizens can take certain steps in the right direction to ensure their home loan approval—
Get a Co-applicant
A senior citizen may choose to apply for the loan with a co-applicant in order to raise their repayment capability. A younger co-applicant, especially one with a good credit score and history of repayment acts as a good co-applicant for the loan. Such a co-applicant could be an earning family member of the primary applicant.
The addition of a co-applicant when applying for a home loan can help increase the chances of approval as well as allow them to get a higher loan amount. Applicants must, however, remember that delay or default in the repayment could negatively affect the credit score of both applicants.
Maintain a Good Credit Score
Maintaining a good credit score heavily influences a bank’s decision to approve a loan application. A credit score of more than 750 points is considered to be good to ensure a smooth application process. Remember, if you file multiple loan applications with different banks, it could reflect negatively on your credit score. Those with better credit scores are often offered lower interest rates and vice versa.
Provide Collateral on Loans
The fact that senior citizens often do not have a stable income can be a hindrance in gaining approval for their loans. So, to secure a home loan, senior citizens can pledge collateral such as mutual funds or equity shares. As a result, the lender will have more confidence in the applicant and approve the loan more readily.
Have a Low Loan-to-value Ratio
The loan-to-value ratio refers to the portion of the total cost of the property for which the loan is being sought. The remainder of the property’s value is to be paid as a down payment by the applicant. As per the Reserve Bank of India (RBI), the maximum loan-to-value ratio for a home loan is between 75 and 90 percent of the cost of the property.
With a lower loan-to-value ratio and higher down payment, senior citizens can improve their chances of getting a home loan. This way, most of the amount is paid in advance as a down payment, giving the lender more trust in the applicant. A low loan-to-value ratio is a good way to secure a home loan if the applicant has a significant amount of liquid savings.
Assess Your EMI Affordability
Lenders analyze whether an applicant can afford the home loan EMI. Usually, banks sanction loans the applicants of which can be in the position to pay 50 to 55 percent of their monthly income as EMI. So, before they can apply for a home loan, senior citizens must take into account important expenses such as medical care and others. If a potential applicant makes a fair estimate of their EMI affordability, they can plan their repayment in advance and lower chances of default.
Here are the documents required for home loan for applicants to keep in mind-
- Aadhaar card, electricity bill or other proof of address
- Aadhaar card, driving license, PAN card or passport as identity proof
- Bank account statements for the last three months
- Latest salary slip and form 16.
Trying to apply for a Home Loan can be a challenging process for senior citizens. Hence, keeping the above factors in mind is important while applying for one. This will help ease out the process. Visit Finserv MARKETS to know more about Home Loan and apply now.