There has been a sea change in the demographic of people applying for a home loan in India over the past two decades. Now that the younger generation earns a higher salary much earlier than their predecessors did, borrowers in their 20s and 30s form a significant percentage of the population seeking home loans.
Similarly, borrowers above the age of 45, or ‘late home-loan seekers’, now have wider options that let them make the most of their limited tenure for repayment.
Several factors are taken into account to decide the eligibility of an applicant -- life stage, creditworthiness, repayment capacity, type of property, employee history, and so on; and the common factor that ties all of these together is ‘age’.
The population of home-loan seekers can be broadly categorised under three age groups: 45-Retirement, 30-45, and those in their 20s. Below are a few important factors to keep in mind while applying for a home loan, and strategies to manage it, for each age group.
45-Retirement
Since 60 is the age of retirement at most companies, it is also the age limit for repayment of your home loan; although there are a few rare exceptions.
At this stage, your prime concern would be the tenure (time taken to repay the entire loan amount, including the interest). Although the maximum tenure offered by all major banks is 30 years, if your age is 45 or more, it automatically means that you have 15 or fewer years for repayment.
Do your research. While this is important for an applicant of any age group, it is more so for a late home loan seekers. Even a seemingly small differential of 50 BPS (100 basis points = one per cent) can make a big difference.
You would also benefit from being a client of a bank that is known to offer a high level of personal service.
The longer the tenure, the better it is. If you are 45 years old, it means you already have only 15 years to repay the loan. The lower the tenure period, the higher the EMI amount.
Keeping in mind your other monthly payments, opting for the longest possible tenure will ensure that you are able to pay your home loan EMI comfortably.
Keep your down-payment amount high. At a mature age, it is assumed that you would have significant savings that can be used to bring down your borrowings. Before making a decision, compare the interest you earn on your existing investments, to the interest on your home loan; also taking into account the tax benefits you receive from your home loan.
Joint loans are a good bet. A joint loan brings down the liability of your high EMIs, and also helps to increase the tax benefits of the entire family.
30-45 age group
While borrowers in this age bracket do not have the problem of short repayment tenures, or unstable financial positions like their younger counterparts, they do need to be cautious about a few things.
Be prudent with credit
Your credit score is the first thing that banks will scrutinise when you apply for a home loan. It illustrates your spending and saving habits, and is an indication of your creditworthiness.
Check your credit score on CIBIL well before you decide to apply for a home loan, and be vigilant about credit card payments, not exceeding your credit limit, and having a good balance of secured and unsecured loans.
Share your liability
A joint home loan account is a good option at this age, as not many would be financially secure enough to be able to pay the entire EMI amount. Banks accept two types of joint home loans -- between spouses, and between a son and his parents.
However, if you are an unmarried girl eligible for a loan, you should be able to bear the entire EMI payment yourself; since you cannot have a joint home loan account with your parents.
Those in their 20s
This makes up the smallest group of applicants for home loans, for obvious reasons -- few have enough financial security and repayment capacity to be considered for a loan by most banks. However, the number of home loan seekers in this age group is steadily increasing as salaries are much higher than they used to be, and the number of young businessmen and entrepreneurs in the country is also on the rise.
Are you old enough? Most banks require you to be at least 21 to be eligible for a home loan. A few need you to be a little older, like Axis Bank (24), and Tata Capital (25).
Stability
If you apply for a home loan at a very young age, banks will scrutinise your professional history more than usual. Conditions for eligibility do vary slightly among banks, but most of them expect you have spent at least a couple of years at your current job.
Consequently, if you have moved cities very often, it is not taken as a good sign by most banks.
No age is too young or old for you to be granted a home loan now, taking you one step closer to owning your dream home!
Illustration: Uttam Ghosh/Rediff.com
The author is co-founder, Housing.com
