Today, less than a year before his retirement, he cannot come to terms with the fact that he has been denied a housing loan. "The bank says I will not have an income after retirement. But I am eligible for a pension from the government," said a dejected Pathak. Nearing 60 years means your home loan servicing tenure will spill into the post-retirement period. Typically, a home loan repayment period is 20 years. After retirement, the only source of income, in many cases, could be the meagre pension. And, the pension amount has to suffice many needs - maintaining a standard of living, medical requirements, and others.

"But, if you have enough savings or investments which you can give as a guarantee, like fixed deposits or shares, that can increase the home loan eligibility and serve as a collateral," said Kamlesh Rao, head (home & personal loan division), Kotak Mahindra Bank. Experts say a self-employed individual can avail of a home loan till the age of 60-65 years for a maximum of seven years and a salaried can apply till 58-60 years (special cases) for a maximum of two years. But, it is not advisable. Even banks may not be too convinced about your repayment capacity.

Guarantee is a major issue. An employed spouse with 8-10 years to retire helps, especially as a co-applicant. Then, there are employed children. "Retirement does reduce your ability to garner a loan. But having a co-applicant with a steady income flow helps," said a senior executive of State Bank of India (SBI).

Joint loan with spouse :Applying jointly will increase the eligibility. In this situation, both the employed spouse and the retired one have to furnish income details. The bank decides the loan amount after clubbing the incomes. The repayment period is also fixed accordingly. "This method is based on the ratio of equated monthly instalment (EMI) and net monthly income (NMI), which should not exceed 60 per cent," said the SBI executive. The interest rate applicable on the home loan will not be higher, but the tenure will be lower, leading to a higher EMI.

If you are nearing retirement (onetwo years left), your income till retirement will be added with the pension to be received. This will be added to the spouse's salary to arrive at the loan amount you are eligible for. Say, you get Rs 3,000 as pension and your spouse's monthly salary is Rs 25,000; the net monthly income is Rs 28,000. You might be sanctioned up to Rs 15 lakh, the SBI executive said. "Ideally, banks try that the loan is serviced before the working spouse retires," said the Canara Bank official. And, if you opt for the teaser rate, banks determine the eligibility not on the basis of the interest applicable in the first year of the loan but in the year when afloating rate will be levied.

But the loan amount can be reduced if you are repaying another loan. There could be a case for rejection as well if the loan to salary ratio is too high. Joint loan with children :Certainly, a better option. Applying with children can increase the eligibility significantly. For one, age is on the side of children, and ensured alonger tenure. This automatically leads to a lower EMI to salary ratio.

With both spouse and children :If your spouse is retiring in the near future, the third option is to include your children as well. The loan amount, in this situation, will be decided on the basis of the joint incomes of all three or on the basis of the first applicant. But the first applicant has to be children. Also, if incomes of all three are included, they should either be staying together or give a commitment that they will service the loan. "However, home loan sanctioning, in such cases, may differ on a case-to-case basis and the risk perception," said the official from Canara Bank.

Source: Business Standard