The best thing about a home is to buy it early. That is when you have a long working life ahead of you and your home loan tenure can also be maximized. However, it does not happen like that for everybody. You may have had some heavy responsibilities on your shoulders and by the time you thought of a home, you are already in your 40s. You may be earning more but your time to repay is also limited. Also, banks would be less willing to lend to you at this age.
However, you can still get a home loan in your 40s and get the best deal. So, if you are over 40 and you apply for home loan, here is what you need to keep in mind.
1. LOOK TO GET THE LONGEST POSSIBLE LOAN TENURE
Typically, in any home loan, the longer the tenure, the lower is your home loan EMI.
If you are above 40, the best tenure you are going to get is between 15 and 18 years and that would mean your EMI is going to be relatively higher.
However, here is what you can do. You can convince the lender to extend to a certain age beyond retirement. That is possible if you show that a considerable portion of the loan will be repaid and the home equity would protect the interest of the bank. In such cases, the bank would be willing.
Also, if you show other sources of income like interest and dividends, your request can be workable.
2. A JOINT HOME LOAN IS BETTER IN SUCH CASES
Availing a joint loan with your working spouse or one of your financially independent children can be a good idea if you are already beyond 40. For example, if your spouse has a longer service tenure available, then opting your spouse as a co-borrower can be a good idea when you apply for home loan.
Alternatively, if your financially independent daughter takes the loan as the primary borrower, you can be the secondary borrower. This may result in easy application as the loan eligibility would be much higher due to her younger age. It will also reduce EMI outflows individually.
3. ONE WAY IS TO ENHANCE THE DOWN PAYMENT AMOUNT
In any home loan, it always makes sense to maximize the down payment so that subsequent EMIs can be reduced.
The bank is more than willing to grant a higher loan or give you a longer tenure with more skin in the game. The best way to prove it is via higher upfront payment.
The larger down payment for the home loan also reduces EMI liability so servicing the same is not such a big hassle in the long run. However, when you are already over 40, make it a point not to touch your emergency funds.
4. LUMPSUM REPAYMENTS CAN ALSO BE AN OPTION FOR YOU
What exactly does this mean? It is always advisable to ensure that repayment tenure of your home loan does not extend beyond your retirement. Ideally, you should retire from service with no liabilities so that you don’t have regular EMIs to worry about at a later stage.
But the problem is that if you go for a 10-12 year loan, then the EMI burden would be quite high.
To combat this, you can work out a bullet repayment, where at the end of every 4 years, you pay a bullet repayment. In such cases, you can have a much lower EMI and not strain your existing financial resources.
5. KEEP THE ZERO COST PREPAYMENT OPTION OPEN
That is something you must always have. You may get a large bonus or a gratuity payout, in which case you should be able to exercise the option to foreclose the loan either partially or fully. However, such prepayment should happen without any prepayment penalty, otherwise it defeats the entire purpose of availing the prepayment option. If you are over 40, ensure that your prepayment option comes with zero penalties. That is when it turns out truly economical.
6. DO SOME BACKGROUND CHECKS ON YOUR LENDER
Before you apply for home loan, it is essential that you thoroughly research your home loan provider. Apart from the rate of interest charges, you must also look at the reputation and credibility of the lender, the ability to guide you in choosing a suitable home, flexibility of repayment, digital and physical service quality etc. Ensure that paperwork and formalities are minimal.
When you apply for home loan and you are above the age of 40, you just need to be that much extra cautious. There are not too many second chances, so make the best of your first chance.