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Home Loan

5 things to keep in mind while taking a Home Loan in your 40s

Summary: Are you planning to buy a home in your 40s? This guide will help you plan smartly from investing in the right property to opting for a joint home loan.

24 Mar 2023 by Team FinFIRST

Buying a home is a dream for most, and Home Loans make it convenient and easy to realise that dream. While it is prudent to get a Home Loan earlier in life, considering they can go on for decades, there is no reason to worry if you want to avail of one in your 40s. 

These tips can help make your plans to buy a home a reality.

1. Invest in the right property


The first step - consider the location and size based on your and your family's needs.

But the 40s can be a tricky, transitionary phase. If your children are due to move out in a few years for higher education, do you need a bigger house? If you are planning on taking early retirement, is this the city where you want to spend your golden years? Count these and others as factors you should consider before making the leap.

The general cost of living, maintenance and upkeep charges, number of dependents, and debt-to-income ratio are some of the other crucial factors that also have a bearing on your decision. Talk to your family, consult a financial advisor, and conduct a cost versus benefits planning before buying a home.

 

 

2. Optimise the tenure basis of your long-term financial health


While some experts recommend maximising the mortgage tenure to reduce EMI payments, others suggest you opt for a shorter term to pay the loan off before retirement while you have a steady income. However, rather than letting age or EMI dictate your repayment plan, you should base the decision on your foreseeable financial health. 

If you are self-employed or have your own business, there is no compulsion to retire at 60, and you could service the loan for a longer tenure. Similarly, if you have been making consistent investments and plan to continue with them, you could generate enough profits/ passive income to help with debt repayment. 

On the other hand, if you do not wish to carry the repayment responsibility in your old age and expect your income to rise steadily in the foreseeable future, you can opt for a shorter tenure with a step-up EMI plan. With this repayment plan, your EMIs rise with your disposable income, thus allowing you to wrap up the loan within a shorter term. 

3. Make a substantial down payment


If you are above the age of 40 years and have been employed for a while, you might have decent savings and investments. You can use that capital to make a larger down payment. Even though most lenders offer loans up to 90% of the property value, making a higher down payment will help bring down your EMI and reduce the interest component. However, buying a home should not come at the cost of liquidating investments made for your other life goals, such as children's education or retirement fund.

Assess investments that you can cull based on their utility and performance. For example, if you have underperforming investments that are not delivering higher interest rates or profits compared to your Home Loan interest rates, you can divert a part of the capital towards the down payment. 

4. Go for a joint loan

Going for a joint Home Loan with your spouse, parent, children or siblings can be beneficial, especially if you are availing of a Home Loan after 40 years of age. When you get a joint loan applicant, the lender factors their credit score and income, giving them the confidence to extend a higher loan amount.

Moreover, having another person share the responsibility of the loan helps repay the loan seamlessly. They can also help you pay off the EMIs faster than the tenure.

Another advantage of having co-applicants on your Home Loan is that all applicants can claim tax deductions on the mortgage. They can claim up to Rs 2 lakh per annum towards repayment of interest under Section 24 and up to Rs 1.5 lakh towards repayment of principal under Section 80C (subject to the overall limit under the Section). That amounts to a total claimable deduction of Rs 7 lakh for the household. 

5. Make lumpsum payments whenever you can


Timely payment of EMIs is great, but take advantage of the opportunity to make a lump sum payment along with the EMI, as it can help you close the loan sooner. In addition, this will enable you to reduce the overall tenure, save on long-term interest costs, improve your credit score, and, most importantly, fulfil your responsibility faster.

The best way to do this is to use windfall gains to make these lumpsum payments. For example, you can use a bonus at work, a high commission on a project, a gratuity amount, or any inheritance you get to pay off your EMI.
 

Wrapping Up


The prime of your 40s is an opportune time to lay the foundation of your financial future. It is crucial to consider all internal and external factors to make a well-informed decision on the mortgage. IDFC FIRST Bank helps simplify the process by offering home loans of up to Rs 5 crore based on your needs and eligibility. A customisable tenure of up to 30 years and competitive interest rates ensures your financial prowess supports your dreams. 

Take advantage of the swift and fully digitised Home Loan application process with IDFC FIRST Bank and get started towards the biggest milestone of a financially secure future!

 

Disclaimer

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