With home loan becoming very important part of the process of buying a house, one should know what are the important factors in determining whether you will get a home loan or not. This also helps you in finding out the overall amount of home loan you will get. The age and regular flow of income are two most important factors in determining your eligibility for availing a home loan. Let us discuss how these two factors affect your home loan eligibility.
Age a determinant for home loan eligibility
Since a lender is interested in getting his home loan serviced regularly, he would take into account your age before he even contemplates considering your home loan application. The age is taken into account for determining whether you have an income flow and also in determining how long the income flow will be available for servicing the home loan. So the lenders give home loan to the people who are in their earning phase so in absence of income flow a student or a retired person will not be able to get home loan.
For example a retired person who is 65 years old will not be able to get any home loan even he possesses huge immovable assets. The reason is simple. The home loan lender is interested in your regular income to ensure timely payment of all your home loan EMIs. He is not interested in how wealthy you are. Likewise your age at the time of applying for home loan will decide how much loan you will get. Younger you are higher will be your home loan eligibility.
For example with ability to pay an EMI of Rs. 50,000/- per month for home loan @ 9% rate, you will get a home loan of around Rs. 64 lakhs if your age is 25 years, presuming you are able to get a home loan tenure of 35 years like one offered by Oriental Bank of Commerce.
However if apply for a home loan when you are 55 years of age, your home loan eligibility will drastically come down to Rs. 24 lakhs as you will get home loan for a tenure of 5 years only (Presuming 60 years as retirement date). So age at the time of making home loan application will decide the amount of the home loan as well as whether you will get a home loan at all or not.
Home loan lenders generally take 60 years as retirement age for salaried and 65 for self employed people like professionals and businessmen. However in case pension received by you is substantial and have other regular income source, the lenders may extend the period of 60 years for salaried home loan borrowers.
Regular flow of income
Regular flow of income is one of the very important factor which held the banks in determining whether you will get a home loan or not. Before granting a home loan, the lender assesses the ability of the borrower to service the home loan with regular and timely payment of EMIs on due dates. The cost of following up with borrowers for delay and default of EMIS is very high.
Likewise the process and costs for recovering outstanding dues and money from home loan defaulters is very high so the home loan lender does not want to take any of such risk of default or even delay in payment of home loan EMI at any time. Regular and timely flow of income, month after month, gives the home loan lender the satisfaction required about the ability of the home loan borrower to service the home loan timely and without any default.
There are some people like film artistes, real estate brokers and many such people whose flow of income is very erratic where in some months they get good inflow of cash and some months pass without a single penny income.
All such people find it difficult to get their home loan applications or even credit card applications considered favourably unless they are able to prove with documentary evidence that though their income, month on month basis, is not regular but their overall income on yearly basis is consistent. This can be done with the help of income tax return for a few years where the annual income is reflected.
Even if the home loan lender gives you home loan where your income is not regular, he will consider your home loan eligibility in terms of amount very conservatively and will give you home loan at the lower end of the eligibility based on your lowest monthly or quarterly income in the past.
So age and regular flow of income will decided your home loan eligibility.