In India, depending on the grade of the employee of central and state government, defence and others, housing accommodation from their respective organization is provided until they retire or voluntarily retire. Till retirement there is no worry of searching for own house unless and until you have pre-planned of owning a house. Similarly no one thinks of renovating or reconstructing existing house. But what’s next after retirement, for the retired person, whose source of income is monthly pension received from the organization they’ve worked over years?
Here are the most common thoughts that come to mind of seniors:
- Post retirement, where will the pensioner stay (assuming they do not have any other house elsewhere)?
- What if they want to purchase their own house?
- Will they get home loan on the basis of the pension amount they receive for purchasing a new house or reconstruction existing house?
Answer is YES. Many banks or housing finance companies in India offer home loan for pensioners. Here are the details:
- Eligibility Criteria: Amongst the various requirements for getting home loan, the important ones are loan limit and repayment period as mentioned in the below table for few banks. For many banks in the below table, loan limit varies according to the age. The table also contains list of lenders (e.g. Bank of India) who also offer normal loans which can be used for only renovating/repair/extension of house. So check with the respective bank on the type of loan and its purpose.
|Lender's Name||Maximum Loan Limit (in INR)||Repayment Period
|United Bank of India||2,00,000||Before applicant reaches the age of 70 years|
|State Bank of India||1) 7,50,000 - 14,00,000|
2) 2,50,000 - 5,00,000 (family pensioner)
|Before applicant reaches the age of 75 years|
|LIC Housing Finance||NA||Before applicant reaches the age of 70 years|
|South Indian Bank||25,00,000||15 years or till pensioner reaches 75 years of age|
|Bank of Baroda||5,00,000 - 8,00,000||77-78 years depending on the age at the time loan was sanctioned|
|Dena Bank||1,50,000 - 3,00,000||Before pensioner reaches the age of 73 years|
|Bank of India||5,00,000||60 EMIs|
|Punjab National Bank||5,00,000 to 10,00,000||1) 60 EMIs
2) 24 EMIs for pensioners above the age of 75 years
- Other factors considered by the lenders before approving home loan for retired persons are:
Pensioner should have been in service with state or central government, PSU, defence, VRS, educational institutions and other reputed companies.
- Should be drawing pension from the applied bank only. However this may not be the case with every bank. In such a case, banks might ask for a post-dated cheque for a pre-fixed period of the bank where you hold pension account.
- Type of property: Mostly pensioners are eligible to take home loan only when constructing/repair/renovating of new/existing house, buying piece of land, purchasing of readymade house/flat. However the condition is that it should be owned by the applicant.
- Minimum monthly pension income received also plays a decisive factor at the time of loan approval. Based on your income, loan limit is calculated. For e.g. United Bank of India asks a minimum salary of Rs. 5, 000. This applies to all the types of loan or credit cards. So if you are a low pension earner, getting a home loan might be tough. Check out home loan for low income earners.
- Age: Ideally any bank will offer a loan to pensioner having age less than 75 years. For e.g. United Bank of India does not provide loan, if the applicant is above 70 years.
Points to remember:
- Not all banks offer loans to pensioners of other banks. So for e.g. you receive monthly pension from State Bank of India but you apply for loan at Dena Bank then your application might get rejected. Because they offer loans to pensioners of their own bank only. So before application, check with the respective bank on their terms and conditions.
- Charges: Along with the interest rate, there are other charges as well. This includes pre-payment fee, upfront fee, and processing fee etc. However as a benefit to the retired person, some banks such as Bank of India and Bank of Baroda do not charge any processing fee for their pension account holder but charges a small fee for other applicants. BoB does not even charge pre-payment fee from seniors. So while applying, make sure to check all the fees and hidden charges so that it does not put strain on your wallet during retirement.