Generally, people are always advised to buy houses while they are working and not after their retirement are retired. This is because once an individual retires retired, their cash flow and expenses can be uncertain, which can lead to lenders being sceptical about offering a home loan. However, this does not mean that a senior citizen cannot get a home loan. There are quite a few ways in which borrowers can improve their chances of getting a home loan after they retire. If you are a retiree looking to apply for a home loan, go through the following points that can improve your home loan approval chances
- Apply for the loan with a co-applicant
Any financial institution would find it safer to offer a housing loan to someone who has an active income. This is why it is better for someone who is retired to apply for a home loan with a co-applicant who is still earning a stable income. This can help in boosting the borrower’s home loan eligibility. In fact, a lot of lenders insist on retirees having earning co-applicants in order to get approved for a home loan.
- Maintain a decent credit record
Whether retired or not, financial institutions are always going to review a borrower’s credit score before approving their home loan application. This is because a credit score indicates the borrower’s responsibility regarding their previous dues. Usually, it is ideal for any borrower to always maintain a credit score of 750 or more.
- Keep your EMI affordability in mind
Before applying for any kind of loan, it is very important to first make sure that the loan’s monthly instalments can be afforded. Financial institutions mostly prefer a home loan’s monthly instalments to not cross over 50%-55% of an applicant’s net monthly income. It is advisable to make use of a home loan EMI calculator which will help in understanding the exact EMI value of the home loan based on the home loan interest rate, principal loan amount, and repayment tenure. After using this calculator, it becomes much easier to plan the home loan’s repayment.
- Choose a low Loan-to-Value (LTV) ratio
LTV ratio refers to the proportion of the loan offered by the lender to the value of the property. A low ratio means that the borrower needs to pay a higher amount from their personal savings to buy a house. By putting down a higher amount, the borrower effectively reduces the lender’s risk of providing the home loan, thus improving the borrower’s chances of a home loan approval.
So, these are a few effective ways in which a retiree can boost their chances of getting approved for a home loan. Also, if the retiree is getting a pension income, they should try and apply for a home loan from public sector banks. This is because they can be eligible for pensioner loans where they can take advantage of marginally lower interest rates.