How Your Age Influences Your Mortgage
For many, their age is just a number. This is, however, not true of home loan borrowers.
Age is one of the important parameters that matter while appraising home loans. Your home loan tenure depends on your age, regardless of whether you are salaried or a self-employed professional (SEP)/non-professional (SENP). The home loan appraisal problems that applicants deal with at different stages in their life are different.
MakaaniQ tells you how the age group you are in influences your home loan:
Home loan applicants aged between 21-40 years
Many homebuyers assume that they should not take a home loan at a young age. This is a misconception. The sooner the better. Home loan tenure is, at most, 30 years. If a salaried employee takes a home loan at the age of 25, he will be able to entirely pay off his home loan 5 years prior to retirement, even if he does not pre-pay/partially-repay the home loan. The younger you are, the longer you can take to repay your home loan.
Someone in his mid/late 20s is expected to have lesser liabilities because he is less likely to have dependents and other obligations compared to someone who is in his mid/late 30s. So, it is much better to apply for a home loan at a young age because you will enjoy a higher percentage of Fixed-Obligation-to-Income ratio (FOIR).
A young home loan aspirant can, on any given day, include his working parents'/ partner's income (i.e. by taking him/ her as the co-applicant) to raise the loan amount they are eligible for.
Young home loan borrowers are also more likely to move up the corporate ladder over years. This gives them a chance to pre-pay the home loan and save on home loan interest.
Lenders are always cautious about guidelines governing the Debt-to-Income ratio. So, if a young home loan aspirant has an education loan running, the bank/financial institution will ensure that there is an ample scope for you to repay the home loan alongside your student loan.
Home loan applicants aged between 41-60 years
A home loan borrower in his 40s and 50s has a lesser appetite for risk than the one in his 20s or 30s. The reason is that they already have a house, family, children, rent and other running liabilities. This is why while evaluating the home loan application, lenders make sure that a middle-aged applicant would be able to handle an additional liability. FOIR is relatively lower for a borrower aged between 41-60 years, because of the stress of a growing number of dependents.
A home loan aspirant of this age group must close the running credit cards and unsecured loans before they apply for a fresh long-term credit. He must always include his employed spouse's income while proving his loan eligibility.
If your expect promotion, it is better to apply for a home loan after getting the advancement/promotion letter from your employer.
Home loan applicants aged above 60 years
Retired home loan aspirants have no regular income, but they do have significant assets and good equity.
Many retirees pick up a job after their retirement. The income they earn after retirement may be lower than what they earned in the past, but if they wish to apply for a home loan, their current income might be considered while assessing home loan eligibility, at least till they remain unemployed.
For a retired applicant, home loan tenure period will be shorter.
Lenders are more conservative while lending to retirees. They can include the earnings of their working children while proving their eligibility. Flip/Step-down repayment option will work in their favor. Such options are used when one of the co-applicant's income may decline after a certain period.
Reverse Mortgage Loan (RML) is a scheme formulated to take care of the needs of homeowners who need financial support in their old age (i.e. after their 60s).
Every bank/financial institution has the delegation of power (DOP) to deviate from the age block. This means that the lender can take a call on deviating up to five years while carrying out usual home loan procedures. But this is completely up to the lender and is done after keeping certain factors in mind. You should be competent and eligible according to your debt and income ratios that are established to estimate your loan worthiness.
Thus, it is advisable to reveal your assets and equity to the lender, apart from your regular income.