It is not easy to get a home loan after you have retired. The obvious reason is uncertainty about borrower income. However, there are many retirees who get regular pension. There is no income uncertainty about their income. Is there a home loan product targeted at such investors? Yes, LIC Housing Finance has Griha Varishtha Home Loan scheme meant for pensioners. Let us find out more about the scheme.
LIC Housing Griha Varishtha Loan: Eligibility
- Retired pensioners from PSU insurers, PSUs, nationalized banks, and Central and State Government employees. Maximum age for such applicants at the time of taking loan: 65 years.
- Even current employees of PSU Insurers, PSUs, nationalized banks, Central & State Government employees are eligible.
- For both (i) and (ii), you are eligible only if you are drawing pension (or eligible for pension) under defined benefit pension scheme (DBPS), where the pension is pre-specified. You are NOT eligible if you receive pension (or will receive) under a defined contribution pension scheme such as NPS.
- Minimum age for taking this loan has not been specified.
- Spouse must be the joint applicant irrespective of the ownership of the property.
There is a reason why LIC Housing Finance is insisting on defined benefit pension scheme (DBPS). By the way, DBPS is the old pension scheme where the Government or your employer takes up the responsibility of providing you pension after retirement. With DBPS, there is certainty of income and the lenders can assess your application accordingly.
With defined contribution schemes such as NPS, there is no such guarantee. Firstly, NPS is market linked. Thus, the pension that you ultimately draw will be linked to the performance of the underlying investments. You can also choose how much you withdraw lump sum and how much to use for annuity purchase. Annuity rate can vary. Secondly, even if you have bought an annuity plan (that guarantees you income for life), you can still exit annuity plans after paying a penalty. Once you exit from the annuity plan, there is no cashflow from the plan. The lender wouldn’t want to take such risk and thus insists on defined benefit pension scheme only.
LIC Housing Finance Griha Varishtha Home Loan: Quantum of Loan
While there is no mention of the maximum loan amount on the website, you can expect calculation of loan eligibility to be no different than for other home loan products. The loan eligibility will be linked to your monthly pension, prevailing interest rate and the loan tenure. The children can be co-applicant in the loan and their income can be considered for higher loan eligibility and loan tenure.
LIC Housing Finance Griha Varishtha Home Loan: Tenure
Maximum tenure for this loan shall be 30 years or until the borrower reaches the age of 80, whichever is earlier. If you have a younger co-applicant (son/daughter/spouse) and the income of the younger applicant is considered for loan eligibility, then the criterion of 80 years of age shall apply to the younger applicant (and not you). Note that if the income of the younger applicant is not considered, then the criterion of 80 years shall apply to you only.
Three Variants
The loan is available under 3 variants, applicable to different scenarios.
1) Six EMI Waiver Offer
Available only for purchase of ready-to-move-in flat or house, where Occupancy certificate (OC) has been obtained. Loan not allowed for repair/renovation or for loan takeover from other financial institutions.
You get EMI waiver of 2 EMIs each at the end of 3rd, 6th and the 10th year of loan tenure provided:
- You have not defaulted on any of the EMIs.
- No principal repayment in the prior 3 years. (there is lack of clarity about this)
- The EMI waiver is implemented through reduction in outstanding loan amount. Thus, you still must pay EMIs. On the dates of waiver, the outstanding principal amount goes down by the amount equivalent to 2 EMIs.
We must look at such contingent offers with a pinch of salt. No largesse from the lender. To avail this offer, you must not prepay any portion of the loan or delay any EMI payments. Exactly what the lender wants. I have discussed the pros and cons of such an EMI waiver offer from LIC Housing Finance. While the timing of EMI waiver is different in the above post, it works in the same manner.
2) Pay When You Stay Offer
Available only for under-construction properties. Not allowed for repair/renovation or takeover of existing loan. Minimum loan of 20 lacs. Maximum loan of 2 crores.
If you buy an under-construction property, you must pay both rent and EMI until you get the possession. And this can be burden on cashflows. To provide, you can manage with paying just the pre-EMI (only interest) and not full EMI (principal + interest) until the construction of the house is complete. There is an additional limitation. The pre-EMI period cannot exceed 4 years or 20% of the sanctioned loan tenure, whichever is lower. Once the house is delivered or the pre-EMI period expires, the loan must be repaid in the remaining loan tenure. I have discussed the pros and cons of such an offer in this post.
3) Two EMI Waiver on Balance Transfer
Only for transfer of home loan from another lender. Nil Processing fee on balance transfer.
You get a waiver of 2 EMIs at the end of the 5th year provided there are no defaults in EMI payments and there have been no prepayments in the initial 5 years of the loan. The waiver works in the same manner as in the 6 EMI waiver scheme discussed above. At the end of the 5th year, if you meet the conditions, the principal outstanding will go down by an amount equivalent to 2 EMIs.
Additional Points
- You can get an interest subsidy up to Rs 2.67 lacs under Pradhan Mantri Awas Yojana if you meet the eligibility conditions for the subsidy scheme.
- The interest rate is linked to the CIBIL score.
- For instance, the interest rate for home loan up to Rs 50 lacs is 6.9% for CIBIL score >=700 and 7.5% p.a. for borrower with CIBIL score <600.
- No credit score (insufficient credit history) is almost as bad as CIBIL score below 600. Thus, it is beneficial to have a credit history and a good credit score. No credit history does not mean good credit history.