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During your golden years, having your own home can give you a sense of security. A property in your name is helpful for many reasons, but primarily because it is an asset you can leverage. However, obtaining a home after retirement can be quite challenging.
Firstly, lenders believe that your reduced income can affect loan repayment. Rightly so, as the income after retirement is not always steady enough. Any age-related health issues could also act as barriers.
However, getting a home loan approval is still possible even after retirement. In fact, the current home loan rates make it a viable choice for many, especially with the right lender. Here, options such as the ICICI Bank home loan, SBI Bank home loan, and others are smart choices but have strict requirements.
Read on for smart and actionable tips on getting a home loan after retirement.
Include a Co-Applicant
Adding an employed co-applicant to your home loan application can significantly increase your chances of getting your home loan approved. Lenders see the inclusion of a co-applicant in your application as a guarantee of repayment due to the steady income and shared responsibility.
However, ensure that the co-applicant has a good credit score with a stable source of income. Besides the assurance, applying for your home loan along with a co-applicant also has other benefits.
While increased eligibility and higher loan amount are a few known advantages, know that you may even get a longer repayment tenure. In some instances, adding a co-applicant may fetch you loans at lower interest rates.
For instance, the current home loan rates range from 8.40% p.a. to 15% p.a. across lenders. Opting for a loan with a co-applicant can lower the interest rates, thus saving your overall loan expense.
Maintain a Good Credit Score
A credit score is a numeric representation of your credit history. Your credit score is expressed in three numbers and ranges between 300 to 900. Typically, lenders consider a score between 750 to 900 excellent, increasing your probability of getting a loan.
A credit score is calculated based on your past credit behaviour, repayment history and credit mix. However, some lenders may sanction loans if the credit score is good, not great. In such instances, you may have to pay a higher interest rate.
As such, the current home loan rates advertised may not always be the rate you get. It will depend on your profile, which is why you must ensure the application goes smoothly.
The credit score is an essential factor when availing any kind of credit facility. This indicates you are a responsible borrower and likely to repay your home loan on time. In addition, it helps banks, NBFCs or financial institutions to determine your repayment behaviour and financial stability.
Limit Your Borrowings and Applications
When planning to get a home loan after retirement, limit the number of existing loans or other credit facilities. With fewer active loans on your profile, you are less likely to default or face difficulties with repayment.
This is why having a low debt-to-income ratio is key. It can make your profile appealing to lenders, as you have adequate disposable income. This fact increases the chances of loan approval.
Moreover, you are free to opt for a lender of your choice. Whether or not to choose an ICICI Bank home loan or an SBI home loan is up to you because of the low debt-to-income ratio.
Plan the Home Loan Optimally before Applying
Remember that planning for a home loan is a crucial decision, and it comes with the responsibility of repayment. You need to pick realistic loan tenures and EMIs and apply accordingly.
Opting for a longer duration can reduce the chances of your home loan approval, as lenders may not approve long-term loans for retired individuals. To avoid loan rejections, plan your repayment by considering all factors and using a home loan EMI calculator.
An EMI calculator is a digital computational tool that helps calculate your EMIs efficiently and accurately. Simply enter the current home loan rate, the amount you wish to borrow and the tenure. That’s all, and you get the home loan EMI within seconds. This helps you plan your monthly finances better.
Choose a Lower LTV (Loan-to-Value) Ratio
The loan-to-value or LTV ratio is the ratio between the amount you need to borrow versus the present market value of the property. For instance, if the lender offers an amount worth half the property value, your LTV ratio is 50%.
A lower LTV ratio can benefit you in many ways while increasing the chances of your loan approval, as you need to make a higher down payment. This reduces the lender’s risk, and you can opt for a loan lower than current home loan rates.
Borrowing from a PSB (Public Sector Bank)
Public sector banks (PSBs) or government banks in India provide particular loans for people who receive pensions. If you are getting a pension from your previous employment, you may be eligible for a pensioner’s loan from a public sector bank.
These loans have simple eligibility criteria to suit your needs and financial requirements. Also, pensioners receive low-interest rates on the loans offered by public sector banks (PSBs) or government banks.
Acquiring a home loan after retirement may require additional effort and planning, and it can be worth it. Like any financial decision, obtaining a home loan after retirement requires adequate knowledge, research and careful planning. You must make the right choice for your profile.
After all, owning this asset during your golden years is practical. It provides you with an asset you can utilise, even though you are paying EMIs, and allows you to pass it down to your loved ones in the future.
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