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.
Home loan eligibility for borrowers over 45
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.
See also: What is an LTV ratio
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.
Tips for getting a mortgage at 45
Home buyers above age 45 can purchase the house of their dreams, by keeping the following points in mind:
- Include your spouse as a joint borrower, to increase your loan eligibility.
- Opt for your second generation as joint borrowers, to increase your chances of getting a higher loan tenor.
- Use your existing savings to increase your stake in the house you are purchasing. This will help in keeping your liability under control and make it easier for your financier to lend.
- Take benefit of the RBI guidelines of nil foreclosure charges and no restriction on number of part payments, to make bulk part payments. Use your retirement funds to make these bulk part payments. This will reduce your loan burden and will make you debt-free fast.
- Avail of insurance along with your housing loan, to safeguard your family from the liability in case of any exigency.
- Most importantly, ensure you have researched well before you finalise your housing loan. Opt for an institution that is friendly towards higher age bracket loan seekers. Check the interest rate on the home loan, as well as the funds invested by you. Do a cost benefit analysis on whether a higher down payment is beneficial or taking a higher loan is beneficial.
(The writer is chief risk officer at IIFL Home Finance)