Skip to main content

See how Reverse mortgage can generate regular income for you...

Senior citizens without any steady income can use this scheme

NO REGULAR income, ailing health coupled with no or inadequate savings pose a serious risk to senior citizens. Senior citizens need a regular stream of income to address their financial needs. Seniors with no other option can consider reverse mortgage scheme offered by banks and housing finance companies. However, a reverse mortgage product is risky as it guarantees income only up to 20 years.

In a reverse mortgage scheme, the senior citizen has to mortgage his house with a bank or a housing finance company, which then makes periodic payments to him. The good part is that the senior citizen can continue to stay in his house till his death.

The senior citizen borrower is not required to service the loan during his lifetime and therefore does not have to make monthly repayments of principal and interest to the bank. The loan becomes due and payable only when the last surviving borrower dies or would like to sell the home. On the borrower's death or on the borrower leaving the house property permanently, the bank recovers the principal amount along with the accumulated interest from the proceeds received out of the sale of the property. The balance amount (if remaining) is passed on to his legal heirs. The borrower(s) will have option to prepay the loan at any time during the loan tenure. The heir of the senior citizen can also repay or prepay the loan with accumulated interest and have the mortgage released with out resorting to sale of the property.


Risks associated in a reverse mortgage loan: A senior official of National Housing Bank (NHB) said, A reverse mortgage product has risks. The bank stops making payments to senior citizens who survives the loan tenure. However, the bank cannot make him vacate the house. They have to wait till his death to recover the loan and the interest.


Therefore, we have introduced a second product called reverse mortgage annuity linked product where incase the senior citizen survives the loan tenure, then the insurance company provides him with income.

"So far it's only Star Union Dai-ichi Life insurance that is offering the reverse mortgage linked annuity product. Talks are on with many insurance companies and banks to join hands and launch this product," said the NHB official.

According to the guidelines set by NHB, banks are supposed to re-value the property mortgaged with them at least once in every five years. Thus, the periodic annuity amount would be revised based on the revaluation exercise. Based on the borrowers requirements, the payments can be on a monthly, quarterly or yearly basis. Incase of medical emergencies, the senior citizen can also avail a lumpsum amount that is usually restricted to 50 per cent of the loan amount. The rate of interest in a reverse mortgage product can be fixed or on floating rate basis.

There are three risks in a reverse mortgage product. The risk of the senior citizen living longer than the asset, high inflation eating into the income he earns and rate of interest rising in a floating rate regime.

Conditions for availing reverse mortgage loan: The person should be a senior citizen above 60 years of age and be the owner of a self-acquired, self-occupied residential property. Incase of a married couple the other person should not be below 55 years of age.


Determination of the loan amount: The bank appoints an independent third-party valuer to determine the market value of the residential property. Based on factors such as the age of the borrower and the prevalent interest rate, banks usually lends a maximum 50 per cent of the value of the property which is amortised for a maximum 20 years. However once the tenure of the loan is complete, periodic payments to the senior citizen is stopped.


All payments under reverse mortgage loans are exempted from income tax.
 

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

What is Financial Freedom?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)     There were many things common between our Freedom fighters. All had the Single vision (Free India), common goal (independence) and had a disciplined and focused approach. They were ready to do anything and everything and had made so many sacrifices to see India free . But the road to freedom was not easy .They had faced lot many hardships, went to jail so many times and even confronted physical and mental torture from the British. There was one more thing which proved to be an advantage to our fighters that most of them were professional lawyers. The knowledge of legal issues and its impact on our country at large has helped them counter various bills and proposed new laws by the then government. It is due to their continuous effort that we are able to achieve the goal of Independent Indi...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now