The Right Age To Opt For A Home Loan
Posted on May 31, 2016
Youngsters these days are becoming financially independent at an early age and many nurture the dream of owning a house. But, not all have enough capital to buy a house at one go. Opting for a loan is a convenient option for such people. Also, in the past few years we’ve seen some attractive schemes initiated by banks and lending institutions, aimed at making it easier to take out a Home Loan.
The age at which one should opt for a Home Loan is a very subjective matter. It could depend on various factors like, income, credit history, familial conditions, and so on. But, financial experts usually agree that people in the age group of 25-40 are most suitable to take a Home Loan.
It’s an Accomplishment!
In India, it is deeply ingrained in our culture to buy property as soon as we start earning. Of course, there’s a sentimental value attached to it, but buying a home at a young age gives you a sense of pride and accomplishment as well. It is probably the biggest investment of your life. And, with the RBI slashing down its interest rates on Home Loans, this dream can now be achieved by people as young as 25 years of age.
Hike in Income
In recent years we’ve seen the purchasing power parity (PPP) of India rising manifold, and this positive situation is expected to improve further. Due to this, more youngsters are coming forward with the intention of owning a dream house. People who’ve crossed the age of 25 often have a stable income, and usually have enough of a corpus with them to afford the down payment on a home. Because of this, individuals in this age bracket pose less of a financial risk to lenders and as a result loan sanctions are easier to obtain.
Tax Benefits on Principal Repayment
As per the newly introduced Section 80C of the Income Tax Act, the principal repayment of Rs. 1 lakh on your Home Loan shall be allowed as a deduction from the gross total. Given that it fulfills all the prerequisite conditions.
No Credibility Issues
Home Loans are easier to get, as banks find them less risky. This is because, a person who is going through a financial crunch may cut down on all their expenses, but will always try their best to repay the Home Loan on time. And since, most of the people in this age group are married, and have families, they are considered to be more responsible. The bank takes these facts into account before sanctioning a loan.
Before opting for a loan you should assess your financial standing. This is because your Eligibility for Home Loan depends a lot on your employment and financial background.
You get Longer and Extended Loan Repayment Tenure
This is where the age factor comes into play. Young people have more working years ahead of them, to help them to pay off their loans. The younger you are, the higher the tenure you’ll get to repay the loan. Suppose, someone decides to take loan in his mid-twenties or early-thirties. They’ll be eligible for a repayment tenure of 25-30 years. Currently, this is the maximum repayment tenure provided by most Indian banks.
Also, youngsters who borrow from the bank can avail of an extension to repay the loan. This is opted for by people who’re currently in a financial crunch, and want a relaxation period on EMI’s from the bank.
However, there is a hiccup here which needs to be considered before going with a loan extension, especially for people in their late thirties and early forties. The reason is that the rate of increase in your income slows down after a point; you won’t find your salary growing the way it used to in your mid-twenties or early-thirties.
You’ll Fulfill All the Age Criteria Required by the Banks
A person’s retirement age is one of the most important criteria for banks when sanctioning a loan. Banks usually facilitate loans to people with the assumption that the loan will be repaid before the borrower’s retirement. There have been many instances where banks has refused to provide a loan to people above 50 years of age.
But don’t lose heart. You’re never too young or too old to buy your dream house. Everything here depends on your financial condition and credibility.
But, before you make plans and zero-in on your dream house, don’t forget to consult your experienced peers, relatives, and financial experts. Real estate is a fragile entity, it may fluctuate anytime. Be watchful of the current market trends, follow the protocols, and do whatever is required.