When buying property, whether as a gainfully employed individual or a retiree, you have to understand one thing: lenders will still look at your income. They don’t mind that you transferred jobs 10 or more times. They won’t even mind if you held jobs for decades. What matters to lenders is your retirement income. How much are you getting each month, and will you have another source of income aside from your pension?
Many retirees wrongfully assume that if they have a fixed income, they will not be eligible for a loan anymore. That is not exactly true. If your income as a retiree can meet the lender’s requirements, then why won’t they approve your loan? Also, if you are okay with short-term loans (meaning, you’ll have to pay more each month), then banks will approve your loans, too.
Work Only with Legal Lenders
It might be tempting for you to check out non-traditional lenders. After all, they promise fast approvals and almost zero requirements as long as you are willing to sign a few documents. But do you know what those documents say? These documents will allow them to impose higher interest rates, penalty fees, and a chance to lock your property if you are amiss in your repayments. This is not the kind of stressful contract you need when buying a property as a retiree.
Many legal money lenders are willing to approve your loan if you are eligible enough. And if a lender says you are ineligible, you should seriously consider not pursuing that loan. Do you know how hard it is to repay a loan when you’re not gainfully employed anymore? Reconsider your attempt to buy a retirement home if your income cannot afford it anymore. In Singapore, many senior citizens still live in the city to enjoy modern facilities and amenities in entertainment, health, and lifestyle.
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Stability of Your Income
Employees who have fixed incomes will be surprised that they might be less eligible for a loan than a retiree. When lenders assess the borrowers’ ability to pay the loan, they don’t necessarily check how much they earn in a month. They look at the stability of that income. Have you been with the company for years? Have you just been hired?
You can boost your income’s stability by having multiple sources of it. For example, you can combine your and your spouse’s salaries, pensions, investments, and other benefits. If you have a small business, you can also add its profit to your monthly income. This will tell the lenders that you will make your payments on time.
Freelancers will have a harder time getting approved for a loan. Even if they earn more than regular employees or retirees, it is difficult to prove that they have a stable income. However, retirees with freelancing gigs will also improve their chances of getting loan approval.
Let Go of Your Old House
Retirees have a harder time qualifying for a loan because they refuse to let go of their old homes. Imagine having to repay two mortgages. Banks will not approve the application for a retirement home if you are still paying for your property in the city. Why don’t you let go of your city home? If the market is good enough, you can start offering it to prospective buyers.
At the same time, you can liquidate other assets and pay a larger down payment for the retirement home. Most lenders will auto-approve your loan if you make a larger down payment. The requirements will not be as cumbersome as making a low down payment.
Fix Your Debts
Lenders will look kindlier at your loan application if you fix your debts. When you retire, you should consider your debt-to-income ratio. You can compute that by dividing your recurring expenses with your monthly income and then multiplying that by 100. The higher that ratio is, the riskier it is for lenders to approve your loan.
Work to lower that percentage by working a side job or paying off your outstanding debts. Do that before you apply for a mortgage. You should also regularly check your credit report to delete erroneous entries there.
Buying a retirement home when you rely only on your pension is hard but not impossible. There are many ways to prove to the lenders that you have a stable income. Fix your debts. Liquidate your assets. Take on a consultancy job. These are just some of the tips you can follow.
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