Mentioned in this article are the tips to follow, if you are applying for a home loan after the age of 45 years
Owning a home is a dream for every individual. Depending on the financial status, every family decides upon purchasing a house at some stage of their life. Some people happen to purchase a house during the early days of their career, i.e., between 20 and 30 years, while some people may purchase their homes during 30-45 years of age and some after 45 years.
A home loan supports the dream of owning a house for every individual. The housing industry has witnessed a boom over the last two decades, with the inclusion of more home buyers, especially millennials. People aged between 20 and 30 years and purchasing a house with a home loan, have an early-mover advantage due to the age factor. People who are late entrants, i.e., who decide to purchase a house after the age of 45 years, at times find it difficult to get a housing loan on their own terms, because lenders have apprehensions relating to the age of such borrowers. Normally, a housing loan has a maximum tenor of 30 years but if you are already 45 years old, your loan tenor would be restricted to a maximum of 15-20 years (up to one’s working age). Lenders consider the continuity of income till the age of 60-65 years and hence, restrict the tenor also to the same.
Nonetheless, being a late entrant should not discourage you from fulfilling your dreams. At this juncture of life, when your kids are college going, you have a nuclear or joint family, etc., you are clear about your requirement of a larger or a smaller house, location, area, etc. You are also clear about your budget and such clarity will help in expediting your search for a house.
As an individual, you may have been working since the early 20s and have an overall career of more than 20 years. During these years, you could have saved a decent amount of money. This amount can be used as your own contribution for purchasing the house. As per the RBI’s guidelines, you can get a loan of up to 90% of the market value, in case of loan up to Rs 30 lakh, 80% in case of loans between Rs 30 lakhs and Rs 75 lakhs and 75% in case of loan amount of more than Rs 75 lakhs but being a late entrant will reduce your loan burden and replace the same by your own funds. This will also help you to manage your liability easily at the later stage of your loan tenor.
Financial Institutions also offer ‘step-down’ repayment methods, where the EMIs are high initially and reduce at a later stage. Normally, this flexibility is offered to borrowers whose jobs provide them a pension. Hence, salary income is considered for eligibility till the retirement age and after that, for the next five years, pension income is considered. It is also offered when a second generation is added to the loan structure who has just started earning and can continue with the liability, post your retirement.
Not only that, if one’s spouse is working, he/she can be added to the loan structure, to enhance the income and eligibility.
To keep your liability under control, ensure that you make bulk prepayments from your savings, gratuity or provident fund money.
Home buyers above age 45 can purchase the house of their dreams, by keeping the following points in mind:
(The writer is chief risk officer at IIFL Home Finance)