Housing loan for retirees

Just a few days ago, I came across some UN estimates on increasing life expectancy. Estimates peg India’s life expectancy at 82 years by 2100. Currently, life expectancy in the country is over 70 years. It was 35.21 in 1950, the data reveals. Comparing the given data, life expectancy in India has improved by 57%.

The increase in life expectancy is attributed to many medical and health advances. If we take into account the onslaught of Covid-19 infection on human habitations across the globe, we find that the invention of the virus vaccine saved the human race from extinction. Sadly, millions of precious lives have been consumed by the virus in various geographies. The benchmark of Covid-19 infection is that the creation of vaccines against deadly viruses has been one of the most crucial medical interventions, drastically reducing death rates. Specifically, many medical and health interventions have improved life expectancy in India.

You must be wondering why I am talking about life expectancy. Basically, the motto of today’s Straight Talk is about seniors, specifically retired public servants. An email from a government pensioner, who is currently in his second year of retirement and receives his monthly pension from a bank branch, forms the basis of today’s topic. The pensioner is looking for a housing loan, but hesitates to go to the bank for installation. He wonders: isn’t there a special housing loan scheme for retirees like him? Interestingly, he cited the increase in life expectancy as a plea for retired government employees to benefit from housing loans and other programs. However, he specifically asked for details of the home loan scheme for retirees.

Generally speaking, getting a home loan for working people is considered a tedious process as it requires lengthy documentation and various approvals. And for retirees, taking out a housing loan seems impossible because their age is not taken in their favor and also their limited income. However, banks and non-bank financial companies have introduced housing loan programs for retired civil servants. So, there are certainly ways for a retiree to get a home loan against their pension and other income, if any. However, the pensioner can obtain the loan from the bank where he holds a pension account. However, some banks allow home loan facilities for retirees who maintain their pension with other banks. Normally, the amount of the mortgage for retirees is linked to their pension. But, if retirees apply for the loan with their children or spouse, they get an increase in the loan amount and also enjoy tax benefits.

Meanwhile, J&K Bank has set up a home loan program for the general public that also welcomes government pensioners. Retirees from UT/Central Government, Government/Semi-Government Enterprises, Autonomous Agencies and Government Institutions are eligible to obtain a housing loan from J&K Bank for the purpose of purchasing land for the construction of a dwelling house on it; for house/apartment construction; outright purchase of a built house/apartment (fully built or under construction); for repairs and renovations/additions/modifications or completion of the existing home. Here are some important features of the J&K Bank Home Loan Program for Government Retirees:

What is the maximum loan amount allowed to a retiree under the scheme?

If a pensioner wishes to obtain a loan for the construction/purchase of a house/apartment, the bank will sanction the loan according to the cost of the project. However, the retiree has to pay the margin and the bank will also link the loan amount to their ability to repay. The margin varies from 10% to 20%, depending on the amount of the loan.

For the purchase of land for the construction of a house, the maximum amount of financing must be at least 75% of the cost of the land plot, 75% of the total housing loan eligibility and submitted at a maximum of Rs.75 lakh.

For the addition/modification/completion of the house, the retiree will receive the loan amount based on the estimated cost of the addition/modification/completion of the house minus the stipulated margin, provided that, where appropriate, the necessary authorization is obtained from the competent authority. .

For repairs/renovations/, the loan amount is linked to the estimated cost of repairing/renovating the dwellings less the stipulated margin.

Remarkably, loans for the repair/renovation of a single residential property can be used several times.

It is also worth mentioning that total pensioner deductions (excluding conversion) must not exceed 50% of their pension/net monthly income.

What are the documents to be presented by the retiree as proof of income?

The documentation in this regard is very simple. The retiree, according to the bank’s scheme, must submit a copy of the PPO and the monthly pension slip. If a retiree does not maintain a retirement account with J&K Bank, they must submit a retirement account statement for the past six months

What is the retirement loan repayment schedule?

For retirees, the loan must be repaid in EMI (equivalent monthly payments) until the retiree reaches age 75. In cases where spouse, children, siblings become co-borrowers/co-borrowers, the age of the youngest borrower/co-borrower may be taken into account in arriving at the term of the loan, provided that its contribution to EMI is at least 40%.

What other specific conditions should a retiree be aware of?

In cases where the applicant applies to the bank for a loan facility to purchase a plot/land, he/she will be required to declare through an affidavit-undertaking that he/she will commence construction of a dwelling on said plot/land within 02 years and complete construction within 03 years of 1st disbursement.

In cases where the applicant owns land/land and approaches the bank for a loan facility for the construction of a house, a copy of the clearance and sanctioned plan/construction plan approved by the competent authority on behalf of the person applying for a facilitated housing loan must be submitted to the bank.

In cases where the applicant wishes to obtain a loan for the purchase of a built house / apartment, it is obligatory for him to declare by means of an affidavit with undertaking that the built property has been built according to the plan of construction approved. .

Are pensioners expected to present a guarantee to the third party as additional guarantee?

Yes. Pensioners who obtain the housing loan must present the guarantee of a third party of the spouse/legal heirs, who is/are entitled to the family pension, as well as an additional guarantee of a person. This is in addition to the mortgage of the accommodation for which a loan has been obtained.

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