6 ways to improve your chance of getting a home loan after retirement

The uncertainties surrounding the life expectancy, income and cash flows of retired individuals usually make lenders hesitant to lend money to them.

Here is a look at what a retiree who wishes to avail a home loan post-retirement can do to better their chances of getting a loan.
Check eligibility criteria
It is possible to get a home loan after retirement, however, along with the eligibility criteria applicable for non-senior citizen borrowers, banks have additional requirements for sanctioning such loans to seniors. Therefore, before you apply for a home loan after retirement, know if you are eligible for it based on your age, income, and other criteria. This is because the eligibility criteria vary from one lender to another, and from one scheme to another.

Gaurav Gupta, Co-Founder & CEO, Myloancare.in said, "Most importantly, the applicant should be a pensioner with an expected stable pension income throughout the loan tenure. Further, the age of the retired applicant should not be more than 70 years at the date of application and the loan repayment has to be completed before the applicant is 75-year-old, which means that a 70-year-old pensioner applicant can get a five-year home loan only."

Add a working co-applicant
Adding a co-applicant, preferably someone with a stable income and a good credit score will reduce the credit risk for the lender.

Gupta said, "Anyone trying to get a loan after retirement may be eligible for a low loan amount, unless he gets in a younger, adequately earning co-applicant. Therefore, most banks insist on having an earning co-applicant son or a guarantor for approving a home loan after retirement."

Further, Ratan Chaudhary, Head of Home Loans, Paisabazaar.com said that adding co-applicant increases the chances of loan approval for longer tenure at probably lower interest rates. "Longer tenure leads to lower equated monthly installments (EMIs) and thereby, higher EMI affordability, which in itself will increase the chances of loan approval," Chaudhary said.

Borrow less
A lower loan-to-value (LTV) ratio might make it easier for you to avail a loan. This means that you'll have to pay a higher amount as your own contribution towards buying the house.

"Opting for an lower LTV ratio will increase the borrower's contribution to the property cost and reduce the EMI. While a higher borrower contribution will reduce the lender's credit risk, lower EMIs will increase the loan affordability. Both of these in combination will increase the loan eligibility of the borrower," Chaudhary said.

Take a secured loan
A loan that is backed by an asset is called a secured loan. Adhil Shetty, CEO, BankBazaar.com said, "Borrow against assets such as another property or gold, or securities such as mutual fund holdings or Public Provident Fund (PPF). Lending criteria is relaxed for loans where collaterals can be provided as opposed to unsecured loans."

Maintain a good credit score
Retired home loan applicants should also remember to review their credit scores before submitting their loan application. "Most lenders consider credit scores of 750 and above as 'good'. Therefore, checking credit score before submitting a home loan application will allow those with lower credit scores to take corrective measures to first gradually improve their credit score and then, submit the loan application with increased loan eligibility (due to better credit score) and thereby higher approval chances," Chaudhary said.

Pensioners should consider borrowing from PSBs
After retiring from a job, if you are getting pension income, then you should look for public sector banks (PSB) when searching for a lender. "Government banks/PSBs provide pensioner loans which you may be eligible for. The interest rates on these are marginally lower in comparison to personal loans," Shetty said.