Buying a House After Retirement – All You Need to Know

Posted in Housing Articles By Sajhyadri Chattopadhyay-
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For most of us, owning a house is a long journey of trying to save every last penny. We dream of the day when we can retire and finally move into a house that we can truly call our own. If you can relate to this, you've probably spent your entire pre-retirement life waiting for that moment and preparing for the big decision. Therefore, it's essential to have all the information on the basics of this entire process. 

How to Begin Saving for a House?

  • Starting Early:

Consider investing in a property even if you don't plan to occupy it for the next few years. The advantage of this approach is having a longer-term to repay the loan. You will have paid a portion of the loan by the time you are ready to move into the new house. The only downside is that your salary may be insufficient to qualify for a loan. 

  • Investing for the Future:

You'll need a housing loan, but you should have funds for the down payment, which typically amounts to 25 percent of the property's cost. Begin investing in an independent savings account that represents the surplus of your salary expenses. If you're planning to invest in a property in the next ten years, consider long term secure funds like Fixed Deposits, which can yield decent returns and help you beat inflation. 

Other Things to Remember

  • Buy a House Within Your Budget: 

It is not wise to buy a house that exceeds your budget. The loan instalments should ideally not exceed 25% of your take-home salary. 

  • Pay Off Existing Debts First: 

Before buying a house, ensure that you've paid off any previous loans. Previous loans can affect the amount of loan you're eligible for, and they can also impact your monthly budget. 

Planning to Dip into Your Retirement Corpus? Think Again!

Partial NPS withdrawal have increased 3.7 times in FY23 to over 4.86 lakhs from around 1.31 lakhs as of FY22. This is as per data from the Handbook of National Pension System Statistics 2023 by the Pension Fund Regulatory and Development Authority (PFRDA). Similarly, data from the Employees Provident Fund Organisation (EPFO) shows that the number of partial withdrawals climbed sixfold to 2.3 crores in FY22 from 38 lakh as of FY19. 

Most of these cases were to buy or construct a residential house, which rose by 4.3 times from 75,292 in FY22 to 3.25 lakhs in FY23. NPS subscribers can withdraw after three years from their joining the scheme and can make three partial withdrawals across their overall subscription tenure. EPF subscribers can withdraw up to 36 times for buying a house and up to 24 times for purchasing land. 

While partial withdrawal of money from retirement funds, such as the National Pension System (NPS) and Employees' Provident Fund (EPF), can help meet immediate financial needs, it can significantly impact the long-term compounding benefits these funds offer. 

Suppose you invest ₹5,000 every month for 30 years at a returns rate of 8%. Your final corpus will come to around ₹75 Lakhs against an investment of ₹18 Lakhs. Conversely, a monthly investment of ₹10,000 for 20 years at the same rate will get you ₹60 Lakhs against an investment of ₹24 Lakhs. 

An Alternative Route: Choose a Home Loan!

Opting for a home loan is often a wiser choice than tapping into your retirement corpus. Home loans help you to effectively cut down your bulk payment for a property and also offers tax benefits, 

Home loan borrowers can get up to ₹1.5 Lakhs tax benefits on the principal repayment sum under Section 80C of the Income Tax Act, 1961. Moreover, they are eligible for up to ₹2 Lakhs deduction on the interest paid under Section 24. 

Home Loan Eligibility Requirements for Elderly Individuals

  • Senior citizens who are still in the workforce can benefit from interest rates as low as 6% 

  • Maximum loan tenure can extend up to 30 years, with a loan amount of up to 90% of the property's value 

  • A minimum monthly income of Rs.20,000 is necessary, and no additional collateral is required as long as the credit score exceeds 750

  • Retired senior citizens face slightly higher interest rates, ranging from 6.75% to 7.75% with a maximum tenure limited to 15 to 75 years 

  • If you have a minimum credit score of at least 750, the loan amount can go up to 70% of the property's value 

Documentation Required by Senior Citizens for Home Loans

  • Valid identification proof (Aadhaar card/PAN card/passport/Voter ID/driving license)

  • Proof of current address

  • Proof of income (Form 16 or the most recent three months' pay stub for non-retirees, pension records for retirees)

  • Bank statements for the past six months

Crucial Tips for Senior Citizens Applying for Home Loans

  • Consider adding a co-applicant to boost eligibility and access better tax benefits 

  • Work on improving your credit score to enhance eligibility and secure lower interest rates 

  • Avoid submitting multiple loan applications to safeguard your credit score 

  • Opt for a lower Loan-to-Value (LTV) ratio to reduce EMI burden. 

 

Your retirement home will be your greatest asset during the senior years of your life. When you browse for a Home Loan on Bajaj Markets, you are choosing a platform that can connect you with a trusted lender and offers benefits like minimal documentation, custom-made plans, and complimentary value-added services. Fund your dream home with Bajaj Markets up to ₹15 Crores at competitive interest rates. 

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