Taking a home loan in your 40s? 5 crucial pointers to keep in mind

If you are planning to take a home loan, check your credit score. Your creditworthiness plays a crucial role in the home loan deal you may get – lower interest rates and better loan terms. A higher score, of 750 or above, indicates you as a low risk borrower, making you eligible for better rates. A lower score may result in higher rates which can increase your repayment burden. A higher credit score also gives you leverage to negotiate for a better interest rate and loan terms with your lender. Buying a home in your 40s gives you enough time to work on your credit score. If you are using a credit card or servicing a loan, ensure that you make regular and timely repayments to maintain a healthy credit score. Your credit score also reflects your overall financial health. In your 40s, you’re more likely to have accumulated some debt—credit cards, car loans, etc.—so keeping your score healthy indicate that you’re managing those debts responsibly.

Choose the lender wisely

A home loan is a long-term commitment that lasts 15-20 years. So, it’s essential that every step of the loan process is taken after thorough research and consideration. When shopping for a home loan, understand the processing fees, repayment charges, penalties, and other loan-related costs. Compare lenders based on these parameters and the features of their loan offerings. Be sure to read the fine print of the loan document. Additionally, assess the lender’s credibility and reputation based on customer experience.

Pay a larger down payment to lower your EMI

A larger down payment can reduce your EMI outgo. If you have extra funds or savings available, consider using them for a down payment to reduce your loan amount and EMI burden. However, it’s important to not compromise on the savings and investments you’ve set aside for other financial goals. Once you decide to buy a house, plan ahead for the down payment. Typically, banks provide 80-85% of the property’s market value as a loan, while the remaining 15-20% needs to be paid by the borrower. Consider using smaller savings for this purpose as they can be rebuilt later. However, avoid dipping into your emergency fund.

Consider taking a joint loan

In your 40s, you likely have significant financial responsibilities, which may limit the funds available. Taking a joint home loan, this case, has many benefits. It boosts your chances of approval and offers higher tax benefits compared to when you apply alone. Lenders typically assess your income and ability to repay when considering your loan application. You can apply for a joint home loan with your spouse who is financially stable, to improve your chances of loan approval. Additionally, a joint loan may qualify you for a longer tenure and allow you to share the repayment burden.

Adhil Shetty is the CEO of BankBazaar.com