Should You Use Your House As Collateral To Get A Loan Post-Retirement?

Despite all the efforts and planning, retirees may sometimes face financially challenging situations. In such an emergency, a home can be used as collateral to get a loan, but should you really go for it?

Amit Sethi
October 23, 2023
House As Collateral

House As Collateral

A financial emergency during retirement comes up with lots of challenges and restrictions. A retiree can use the contingency fund to meet the small-ticket financial emergency or liquidate a small portion of the retirement corpus to overcome the situation. Still, if it’s a big-ticket financial emergency, you have limited options for rescue. Loans can be used to overcome big-ticket financial needs. However, retirees usually can’t get a big-sized unsecured loan as they don’t have a regular income source. So they have to go for a secured loan. Depending on the loan amount requirement, they can get a loan against investments such as shares, mutual funds, or FDs, or they can also mortgage their residential property to get a loan. Should you really mortgage your home to get a loan? Here are some important factors that can help you make a decision on whether you should mortgage your home to get a loan or avoid it.


Have You Explored Other Loan Options?

Before putting your home as collateral to get the loan, you must explore the other assets that you can pledge to get the loan. For example, you can pledge your car, gold jewellery, shares, mutual fund investments, FDs, etc., to get secured loans easily from the banks. Such secured loans are often processed very fast, and you can also get them at a very low rate of interest. However, if your loan amount requirement is bigger than the other assets available to you, or if you are looking for a longer repayment period to repay the EMIs comfortably, then a loan against your residential property can prove to be a better choice. A loan against residential property allows a longer repayment period of around 15 years with a maximum repayment age of up to 80 years, whichever is earlier.

Will You Be Able To Repay The EMIs On Time?

Do you know what happens when you can’t repay the loan against the property on time? The lender may seize your property and auction it to recover their amount. So, it’s important to make your calculations well in advance. Do you think you’ll be able to repay the loan against your property on time? If you are absolutely sure that you’ll be able to repay the loan, you may go ahead and avail of the loan or else avoid it.


Banks usually offer a loan up to around 80 per cent of the property’s value, so you often do not get the funds for the remaining 20 per cent of the property’s value. So, if you think you won’t be able to repay the loan, you may sell your property and use the partial amount to meet your financial emergency and utilize the remaining amount to buy another home of a smaller size for living in it. If the remaining amount is insufficient to buy a home, you may shift to a rental property and use the fund to repay the monthly rent. Choose a rental property for which you can easily afford to pay the rent for the rest of your life.

Authored By: Amit Sethi, Independent Financial Journalist

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