Busting The Old Age Myth

One of the popular myths among borrowers is that if you are above 60 (senior citizen), you are not eligible for home loans. The other myth is that home loans are only given against salary during the working life of the individual and not against pension of a retiree. 

The reality is that both are eligible to get home loans, although it would still depend on the repayment capacity of the borrower and the tenure, obviously, will be shorter.

It is perfectly possible to get a home loan for senior citizens.

If conditions seem a little tighter, keep in mind that most senior citizens and pensioners have already repaid all their liabilities. That can work in favour of loans for pensioners. After all, as the old saying goes, your psychological age has nothing to with your biological age.

No Loans for Old People: That is a Myth

The reality is; banks have been quick to recognize that the senior citizens are a fairly large market. Most of them have some form of fixed income flow; as government pension or private pension or interest or dividends on investments. Many of the retirees have also created a good corpus over the years, which is used to structure systematic withdrawal plans.

Most senior citizens have full ownership of their homes and are free of debt and responsibilities.

So, senior citizens are an important market for these banks. While getting home loans for senior citizens is a slightly more complex process, it is not entirely impossible.

The other general misconception is that home loans for senior citizens would come with sharply higher rates of interest. While it is true that the tenure of home loans for senior citizens is shorter, there is no rule about higher rates of interest.

In fact the banks actually go out of their way and even offer concessions to the senior citizens to take loans at a small concessional rate of interest. 

Quite often, retirees prefer to lease out their bigger houses and move to a smaller place which is easy for a retired couple to maintain. In such cases, the banks also fund the home loan for the senior citizen against the rent receivables.

So, there are innovative ways by which home loan for senior citizens can be easily worked out and the banks don’t want to lose out on this lucrative market with low default rates.

Banks want to offer loans for pensioners considering their conservative and prudent approach to borrowing. 

What Decides the Home Loan Eligibility for Older People?

The home loan eligibility of senior citizens is contingent on a number of factors.

• Sources of income and the stability of income matters a lot. This decides the eligibility of the senior citizens. If the income is in the form of government pension, private pension, rental income, interest/dividends, SWP flows etc, then the bank is likely to view this positively as a factor to consider for home loans. These are valid income sources that banks consider when granting a home loan for retired persons.
• Normally, the maximum age when the loan has to be repaid is 75 for most banks. Hence, if you are 60 plus, then the maximum loan tenure you would get is 10 years. You need to plan your apartment purchase accordingly. It will be sharply lower than when you start your career.
• It is a major positive if the senior citizen is totally debt free and does not have monthly EMI payouts. That makes banks more than willing to fund the home purchases of such senior citizens. However, if the debt is high or if the age is high, then the bank may insist on a co-signer or guarantor for the loan.
• If you are look at a home loan for senior citizens, then a good CIBIL score is mandatory. No bank wants to give loans if you defaulted in the past or have liabilities to handle. Hence, loans for pensioners would pre-suppose that you have been prudent on debt management and do not have large outstanding amounts on your credit card or personal loans.

Do Banks Give Special Treatment for Senior Citizens?

Yes, there are some special privileges for such senior citizens. For instance, banks are recognizing senior citizens as a huge market and are now offering tailor made solutions for such senior citizens.

• They offer flexible repayment options, bullet payments, etc. The banks also consider the impact of the tax breaks to decide on sustainable cash flows.
• From time to time, the banks also come out with special concessions for such senior citizens on rates, processing fees, etc.
• In addition, retirees also get free counselling and door service, considering their age.

 To sum up, just because of your age, no bank will deny home loan for senior citizens. Aged people are emerging as a distinct market for various financial products and banks are conscious of that. The loans for pensioners fits into this new thinking.

COURTECY : https://www.sbirealty.in/blog/home-loan-for-pensioners-and-senior-citizens