Availing of a home loan is never a simple proposition as this grows. Living a comfortable life after retirement is a dream for several, and many want the same to be enjoyed in a house of their own.
Though home loan rates are at an all-time low, with some banks and lending institutions offering loans at nearly 6.90 per cent interest, retired people often
find it too difficult to avail of a home loan. Though some banks offer special loan products for pensioners and retirees, the inherent vulnerability connected with growing age and increased vulnerability to failing health refrains many from accepting loan applications by retired people.
Retired home loan applicants, unlike their younger and working peers, are more prone to miss their house loan equated monthly instalments (EMIs) or find it too difficult to repay their loans on time as a result of not enough regular income and sudden unforeseen expenses. This contributes to an increased danger of loan rejection in several
cases. Many retired people aren’t alert to some basic factors that may increase their likelihood of loan approval and relieve them of the looming loan liability.
Short Loan Tenure
Banks, housing finance companies and non-banking finance companies cross-check and verify the antecedents of retired people seeking home loans to decide their eligibility for the loan amount. With the retirement period being synonymous with loss in income and an increased tendency to suffer from diseases, lending companies prefer to avail loans to retired people less than 70 years old.
This implies a retired person aged 60 years can take a loan for not an interval not exceeding ten years. Retired people must apply for brief tenure loans to ensure that their loan applications are thought out and approved in one go.
Lower Loan Amount
Irrespective of the loan-to-value (LTV) ratio that the lending company may profess, retired people must opt for less loan amount to ease the loan application and approval process, which means that a retired loan applicant must certainly be prepared to bear the burden of contributing a major part of the property cost before borrowing the remaining portion of the amount.
Also, less loan amount translates to lower EMIs, thus, increasing the loan affordability of the borrower and reducing credit risk for the lender. Retired people unsure of their EMI outgo can use an EMI calculator available online to check on the amount of money outflow and determine the loan amount they have to apply for.
Adding a Co-applicant Helps
Retired people looking for a higher loan amount must co-apply for the loan with someone with a well-balanced income and high credit score. The reason being retired individuals are entitled to small loans only. Applying for a shared loan with someone younger and more entitled to loan repayment owing to age and regular income increases the likelihood of availing of a greater loan amount for a lengthier tenure at lower interest rates.
Many retired people recognize that they have to pay higher EMIs due to limited loan tenure and could add a co-applicant in their loan application to borrow significantly more than they could return easily through reduced EMIs due to the longer loan repayment period available.
Providing Insurance as Collateral
Lending companies may insist on a home loan insurance plan combined with a home loan to avoid the latter from turning into bad debt. Though buying home loan insurance isn’t mandatory, retired people must pay for it to secure the asset, which is why they seek the loan.
However, retired loan applicants who have already bought an insurance cover do not need to avail of the property loan insurance facility and can opt for offering their term insurance policies as collateral for the loan. This can ensure quick approval of the loan and repayment of the entire loan amount in the event of the sudden death of the borrower.
Also, the retired loan applicant must verify that the insurance cover amount is added up to or more than the loan amount to make certain full repayment of the
loan from the policy amount. While both types of insurance policies protect the loan applicants, sometimes, the loan applicant cannot transfer your home loan insurance plan if the housing loan is transferred to another lender.
Take a Secured Loan
Banks are mostly apprehensive of supplying loans availed without collateral. Therefore, retired people must opt for a secured loan. A loan application backed by an advantage ensures greater acceptance by the lenders. Lending companies prefer securing loans so that the asset may be used as collateral to fund the unpaid loan if the retired applicant falters in repaying the loan amount.
