How Late Home Loan Seekers Can Dazzle Banks

Today's youth are duly sensitised about property ownership. They would not depend on their retirement savings to buy a property in the twilight years of their life, as was usual and fashionable among their parents. It is easy to have access to bank finance to afford the luxury while they are in their early 20s. Resultantly, the share of young borrowers has been growing at a great pace. In 2014, 25 per cent of the credit applicants were people under 30 years. This number was only a seven per cent in the overall number in 2008, data available with Cibil show. In the same period, the percentage of people under 40 years applying for loans reached 60 per cent from the earlier 50 per cent. All these “intimidating” developments may often dishearten late home loan seekers. Several questions, often threatening in nature, pop in such a prospective borrower's head.

Would banks be willing to lend you money to buy a home if you have crossed 50, and are quite close to your retirement?

Unlike a 20-something, you do not have much time to repay your home loan. Would they deter banks from lending money to you?

You have reached a stage in your professional career where substantial hikes may not come your way. This means chances of prepayment are bleak. Would banks not give a negative marking to that?

You never took a loan. Should that not work in your favour?

These and many more doubts might arise in your mind. Now, let us try to find a solution.

Age and income are the two prime factors based on which banks issue a home loan. Naturally, a young borrower can service a loan for a longer period — 30 years, to be exact. A younger borrower will see his income grow over the year. Financial lenders can bank on this borrower to fulfill the obligation easily as his income swells in future. They have all the time in the world to fulfill their financial liabilities, so to speak. Now, because a late home seeker can hardly do anything about the age factor, he will have to score better on the other front i.e. his income.

Show them the colour of your money

Because you spend a large part of your life without taking a loan, we assume you have substantial savings. While banks typically ask for 20 per cent of the total cost to be paid as down-payment, a borrower over 50 years will have cough up much more to make the bank interested in providing him a loan. Your mantra to easily secure a loan would be to keep the loan amount as low as possible. Do not forget that there would be tax benefits of taking a home loan that should make up for the losses you have been incurring on your saving deposits, to some extent. Also be mindful of the fact that the quality of your income, the stature of the company you work for and your job profile will have a direct bearing on the bank's response to your home loan application. Those who have stable jobs, impressive work profiles and well-established employers would find it easy to secure a home loan.

Something to fall back on

Banks would warm up to a late home loan seeker if he comes along with a younger co-applicant, preferably an earning family member. This co-applicant, who is responsible to pay off the debt in case the principal borrowers is unable to, provides financial institutions a guarantee that their investment is safe. Get your working children or spouse on board to become a co-applicant in the loan application, even if you are well placed to pay off the debt on your own. The co-applicant would also be able to avail of tax benefits while helping you secure a loan.

No history is no good

If you are servicing several small-scale loans, you may find it difficult to secure a new loan. It is advisable to close all the previous loans before you go home loan shopping as a late seeker. However, you thought wrong if you assumed financial institutions would be impressed because you never took a loan. A record showing responsible repayment behavior would impress banks greatly. On the other hand, in the absence of a credit history, banks may not be able to assess how capable you are to handle a loan. Long gone are the days when no credit history used to reflect positively on you.

Noteworthy

• Banks keep launching schemes meant to cater to senior borrowers. Opt for a plan that meets your requirement.

• In case you are able to manage, pre-pay your loan as soon as you can.

• As keeping it light is your guiding principle, do not burden yourself because you would want a bigger house in a better location. In many ways, your options might be limited.