Most elders wish to own a house. This can be their long-term dream to fulfill for their family. After retiring from work, many people want a comfortable life without too many financial commitments. However, some have misconceptions about taking loans after retirement and give up on their dreams.
But did you know? Elders can renovate or build new homes by taking home loans from Indian lenders and benefiting from government schemes. Read today’s Brick & Bolt blog to learn more about housing loans for pensioners!
Can Pensioners Get a Home Loan?
Similar to all others above the age limit of 18, senior citizens below 75 years can also take home loans to purchase new houses, construct new houses, and renovate existing houses.
Since elders have stable pension income, banks and non-banking financial companies (NBFCs) offer home loans. Government-backed schemes, such as the Pradhan Mantri Awas Yojana (PMAY), have also been initiated to support pensioners in obtaining home loans. However, there are some restrictions on age limits and loan tenure.
Eligibility Criteria for Pensioners
If elders meet the following common eligibility criteria in India, they can easily get housing loans:
Age Limit of Senior Citizen:
For sanctioning house loans for senior citizens, most Indian lenders set a maximum age of 70 to 75 years at the loan’s maturity. This means the complete loan amount must be repaid before the borrower reaches this age. Because of this, their loan tenure will be shorter, often limited to 15 years.
Income Proof:
A stable income is essential before taking a home loan. Pensioners need to provide documents such as pension slips, annuity incomes, or proof of rental income as proof of their income source.
Credit score:
Senior citizens should have a good credit score, ideally 650 or more. Lenders make use of your credit scores to assess the risk of lending. A higher credit score can lead to lower interest rates.
Co-applicant Option:
Lenders enhance home loan eligibility for pensioners by offering co-borrowing options with their younger family members. They must be a working person with stable incomes. This strategy can also help to increase loan tenure.
Types of Home Loans Available for Pensioners
In India, different types of home loans are available for retirees. Some main types are as follows:
Regular Home Loans:
These are the most common types with fixed or floating interest rates. These loans are structured like standard mortgages and can be used to buy a new home or refinance existing properties. Fixed-rate loans provide borrowers with stable monthly payments, while floating rates may vary based on market conditions, potentially offering lower initial rates.
Reverse Mortgage Loan:
These loans allow pensioners to receive funds against the equity in their property. This type of loan is mainly beneficial for seniors aiming to supplement their income without the obligation of monthly repayments until they move out or pass away.
Top-up Loans:
These loans are available for existing borrowers looking to increase their loan amount. This additional borrowing can be used for various purposes, such as home improvements or medical expenses, providing flexibility to those who already possess a mortgage.
Home Loan Interest Rates & Loan Tenure for Pensioners
In India, interest rates for home loans range from 8% to 10% per annum, depending on the senior’s credit score and income. However, they may vary from one bank to another. The following are the interest rates and loan tenures offered by different lenders in India:
State Bank of India (SBI):
Interest rates range from 8.25% to 9.40% p.a. for home loans. Pensioners can opt for shorter tenures based on their age and repayment capacity. SBI offers special schemes for retired government employees and defence pensioners.
HDFC Bank:
Interest rates start at 8.70% p.a., with flexible repayment options. HDFC allows pensioners to apply jointly with earning co-applicants to enhance eligibility.
Punjab National Bank (PNB):
PNB offers interest rates starting from 8.15% p.a. with fixed-rate options up to 11.50% p.a. Pensioners can benefit from waived processing fees in select schemes.
South Indian Bank:
Interest rates start at 8.50% p.a., with tenures ranging from 5 to 15 years. The bank provides home loans for purchasing ready-to-move homes, constructing houses, or buying plots.
Canara Bank:
Canara Bank offers home loans starting at 8.25% p.a., with repayment tenures of up to 30 years, but it typically requires completion by the age of 75 years.
Federal Bank:
Federal Bank provides home loans at interest rates starting from 8.80% p.a., with flexible tenure options and competitive processing fees.
To better understand how these rates might impact your monthly payments, try our home loan EMI calculator and get a clear picture of your potential loan structure.
What Documents Do Pensioners Require to get a Home Loan?
For the application of home loans by pensioners, they need to submit the following essential documents:
Age Proof: Pensioners need to submit documents like a birth certificate or government-issued ID confirming the applicant’s age, which impacts loan eligibility.
ID proof: They must submit their ID proof, such as an Aadhaar card or PAN, for verification.
A pension slip or annuity statement: Lenders consider this as proof of regular income. This will help them consider seniors as borrowers with the financial capacity to repay the loan.
Property Documents: If seniors are taking loans against their property, they need to submit relevant documents detailing the sale agreement, title deed, and approved building plans to display legal ownership and validate the property’s worth.
Bank Statements: Elders need to submit their bank statements for the last six months. This data will enable lenders to analyze the applicant’s transaction history and savings.
Government Pensioner Home Loan Schemes & Subsidies
The Indian government created the Pradhan Mantri Awas Yojana (PMAY) to benefit Indian citizens, including senior citizens, to build affordable housing. Under this scheme, senior applicants can avail themselves of specific provisions, such as preference for ground floor housing and interest subsidies on home loans. Furthermore, the PMAY supports the Economically Weaker Section (EWS) and Lower Income Group (LIG) categories by providing interest subsidies of up to 6.5% on loans up to ₹6 lakh, easing the financial burden of homeownership for pensioners. Along with national schemes, different state-specific programs also exist to support retired people to secure home loans.
Alternatives if Loan is Rejected for Pensioners
If a house loan application is rejected for pensioners in India, there are several other alternatives to get financial support. Some of them are as follows:
Reverse Mortgage Loans: A reverse mortgage is a special loan designed to support senior citizens (who are aged 60 years and above) who use their self-occupied residential property as collateral so that they can get a monthly income over a specific period of time. This can help to maintain their standard of living, pay for medical care, and have a financial safety net to overcome emergencies.
Personal Loans: Elders can avail of personal loans to meet their requirements. There will be no processing fees for defence pensioners. Nominal fees are charged otherwise. These loans may come with elevated costs for higher interest rates, but they provide quick access to funds for immediate needs. However, the spouse who is eligible for the family pension must stand as a guarantor. If the spouse is not alive, any other family member or third party can be a guarantor.
Loans from Cooperative Societies: You can take loans from cooperative organizations. They can offer even better loan terms for pensioners than banks. Since they are community-based, they can provide financial help when other options are not available.
Pensioners have various home loan options available from different lenders. It’s important to choose wisely based on individual financial situations and personal needs. However, one must take caution and consider factors such as life expectancy and family requirements before making a decision.
Hemali Patel