Home Loans In Retirement: What Retirees Should Know Before Applying For A Loan

Home Loan

India is experiencing a quiet demographic shift with the decadal growth rate of its elderly population currently estimated to be at 41%. This figure is expected to double within two decades. According to a report by CBRE South Asia, India is expected to be home to 17% of the worlds’ elderly population by 2050.

This evolution is driving demand for independent living options, signalling not only growing awareness around the needs of “silver aged community”, but also a shift in the lending ecosystem, with financial institutions becoming more open to extending credit to this segment.

The question remains: where can they obtain home loans at this age to build their own house?

How Senior Citizens Can Secure Home Loans Post 60

Senior citizens in India have multiple loan options to realise their homeownership goals, and each of them comes with its own pros and cons.

• Standard home loans for seniors usually have higher interest rates and stricter eligibility requirements, with access to shorter loan tenures and lower loan amount vis-a-vis working professionals. In comparison, Pensioner loans offer more relaxed criteria, considering pension income as a reliable source of funds. They might even offer slightly lower rates.

• Another option is the reverse mortgage, which lets seniors unlock the value of their homes without selling it. While reverse mortgages can help create a steady income stream, they require caution as the loan balance can grow and even exceed the home’s value.
  • A reverse mortgage is a special type of home loan designed for senior citizens (usually above 60 years). It allows retirees to mortgage their home to a bank or lender despite not having a regular income.

  • Instead of you paying EMIs, the bank pays you — either as a lump sum, monthly income, or in parts — using your home’s value.

  • You continue to live in your house as long as you’re alive. After you pass away (or move out permanently), the bank recovers the loan amount by selling the house.

  • If any money remains after repayment, it goes to your legal heirs.

Understanding each of these options can empower seniors to make informed decisions about financing their homes during retirement.

As a senior citizen, if you are looking to maximize approval chances, follow these steps –

● Maintain a strong credit score – ideally 750 or above. This will help secure improved rates and better tenure.

● Consider adding a co-applicant, preferably a younger family member with a steady income. This can improve your loan eligibility and the possibility to extend the loan tenure.

● Make sure you are debt-free or have minimal liabilities. Lenders favour debt-free applicants, especially senior citizens.

● Furnish clear income documentation – whether pension, dividends, rental incomes, consultancy fees. Consistent cash flows increase eligibility.

● Choose a lower loan-to-value (LTV) ratio as a higher down payment reduces obligations and improves lending terms.

● Opt for a shorter repayment tenure aligning with your age – typically up to 15 years maximum and by the time 75 (preferably not more)

● Enquire about government schemes such as the Senior Citizen Housing Scheme, which offers subsidies for home purchases.

● Explore various lenders and opt for one that is tailored to your requirements. Compare factors like interest rates, processing fees and other charges.

Realising homeownership in retirement is possible when backed by careful income planning, credit discipline and a tenure selected meticulously, argues Atul Monga – CEO& Co-Founder, BASIC Home Loan. Adding a younger co-borrower makes things easier, he adds.