Yes, it is possible. Housing loans for senior citizens is possible. A retired senior citizen above the age of 60 years, drawing a monthly pension can definitely apply for a home loan. Age is just a number and as such getting a mortgage on a pension income is possible anytime provided the seniors have money to make a down payment, to pay the monthly instalments and to pay the property maintenance as well as property taxes. As correctly said “ You are never too old to buy a house of your own”. But post retirement when the income source is not steady and is restricted, qualifying for a home loan can be tougher.
This is why banks are usually reluctant to provide the home loan for pensioners due to the risk of loan default. As a result we could see there are mainly nationalized banks that lead in providing housing loans for pensioners and only a few private sector banks and NBFCs. Griha Varishta of LIC housing, SBI Pension Loans, Maha Super Housing Loan Scheme of Bank of Maharashtra, Bank of India Star Pensioner Scheme, Bank of Baroda & PNB’s loan for pensioners schemes, Canara Bank home loan for pensioners, etc. are some of the schemes by the nationalized Banks offering senior citizen loans for buying a house. The home loans by these banks are specifically tailored for the prospective home buyers who are living the retired life.
Home Loan Eligibility For Pensioners
|Pensioner Meaning||One who has served a reputed company/ an education institution.An central or state government employee.Employed in a public sector undertaking (PSU).One who has taken voluntary retirement.One who has served in defence.|
|Who Can Apply||Senior citizens above the age of 60 years.Senior citizens having monthly income sources.Senior citizens having a good credit history.|
|Purpose||Purchasing a new house.Purchasing a plot and for the construction of the house on the plot.Construction, renovation & repair of a new house.Construction, renovation & repair of an existing house.|
|Tenure||15 years or 75 years whichever is earlier. (Some Banks also provide loans up-to 80 years but subject to conditions)|
|LTV||70% of the market value of the property.|
|Home Loan Interest Rate For Senior Citizens||Differ from Bank to Banks and range between 7%p.a. – 9% p.a. At times the retired might be charged with high interest rates due to the higher expected lending risks.|
|Loan Amount||Maximum subject to the income eligibility and LTV factor.|
|Use Home Loan EMI Calculator To Calculate Your Loan Eligibility|
How To Improve The Chances For Approval?
The eligibility criteria for the loan approval remain the same for all i.e., income, assets, debts, and credit. However, it can be tougher to meet these criterias post retirement, especially when it comes to income, pensioners can consider the suggestions to improve their chances of home loan approval.
- Apply For Smaller Loan Amounts
Smaller loan amounts have smaller EMIs and can be easily served by the retirees. Try to keep the down payments high while keeping the loan borrowings to the minimum. In this way, it would not be difficult to pay the monthly installments. Ideally, the EMI amount should not be more than 60% of the take-home pension.
2. Apply With Your Pension Bank
Apply with the bank in which the pension amount is received. Banks generally provide the home loan only to those pensioners having pension accounts in their respective banks. This improves your chances for loan approvals. However, it is also possible to get a loan from other banks who provide home loans for retired persons provided all the eligibility criterias are met.
Also Read: 10 Important Home Loan Tips.
3. Provide Collateral
Provide heavy collateral such as mutual funds, immovable assets such as residential property, commercial property or plot, heavy machinery, etc. If a substantial retirement fund is built up over the years, these funds can also be used as a guarantee on the home loan.
Also Read: 10 Common Home Loan Mistakes.
4. Close Other Loans
The senior citizens must have enough ongoing cash to repay the mortgage. Having multiple loans or more than one loan means more debts which means more liabilities and more EMIs to pay. Having more than one loan by your side will affect your home loan eligibility and hence it is advised to close other loans before applying for financing and ensure to keep the credit exceptional and debt-to-income ratio low. Home loans for pensioners with bad credit are not entertained.
5. Apply With An Co-applicant
Many times the pension amount is limited compared to the monthly salary income which resists in availing higher loan amounts for the pensioners. Also because of age the loan tenure is shortened which results in heavy EMI outgo per month. Hence it is advised to apply for a senior citizen housing loan along with a working hand in a family. The pensioners can add his/her son, daughter or daughter_in_law as a co-applicant to the home loan and take their age & income to his/her advantage. This will earn improved eligibility and loan tenure for the pensioners.
6. Maintain Credit Score & Avoid Multiple Applications
Credit score is yet another vital factor considered by the banks while providing the home loans to its borrowers, be it a young borrower or a retired pensioner. Those with credit scores of 750 & above are considered financially disciplined which lowers the funding risks for the banks. It is therefore important to maintain the credit score throughout life. A good credit score at times also earns a better home loan interest rate for the senior citizens. Additionally it is also advised not to make multiple loan applications at a time, this may reduce the credit score of the borrower.
Also Read: CIBIL And Its Significance In Home Loan.
Documentation For Pension Home Loan Scheme
|KYC||Pan Card, Aadhar Card, Latest Passport size photograph & Residence Proof.||Pan Card, Aadhar Card, Latest Passport size photograph, Residence Proof & office proof.|
|Income Documents||12 months pension account statement. 12 months other bank account statements.||For salaried – 4 months Salary Slips, 6 months Bank Account Statement, 2 years Form 16. For self-employed – CA certified copy of latest 3 years ITR with Saral form, Balance Sheet, P&L Account, Capital Account, 12 months bank account statements of all bank accounts savings + current account.|
|Property Documents||Prior Chain of AgreementOC/CC + approved plansIndex 2Share CertificateSociety Registration CopyProperty Tax Receipt|
|Other Documents||Duly signed home loan application formProcessing fees cheque|
For a detailed home loan list of documents kindly refer to the following links.
- Home loan Resale Case for salaried, for self employed – Proprietorship firm, Private Ltd. Company, Partnership Firm.
- Home loan from builder for salaried, for self employed – Proprietorship firm, Private Ltd. Company, Partnership Firm.
With excellent credit, a low debt-to-income ratio, and a strong financial portfolio mortgage loan for senior citizens is definitely possible. But before applying for a home loan as a pensioner, it could be worthwhile obtaining professional financial advice to help achieve the property investment in a realistic way. With experts like Loanfasttrack, nothing can stop you from finding the house of your dreams at any age.
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