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

Post Office Deposits Interest Rates

Best SIP Funds to Invest Online   SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich For further information on Top SIP Mutual Funds contact  Save Tax Get Rich on 94 8300 8300 OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com

HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300     HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO will be open for subscription from 16th May 2014 to 30th May 2014. The key features of the scheme are as mentioned below:   Type of Scheme A Close Ended Capital Protection Oriented Income Scheme Benchmark Crisil MIP Blended Index Fund Manager Mr. Anil Bamboli , Mr. Vinay R Kulkarni & Mr. Rakesh Vyas New Fund Offer (NFO) Period 16 th May 2014 to 30 th May 2014. Minimum Application Amount Rs. 5000 and in multiples of Rs.10 thereafter Plans/ Options Offered Growth and Dividend Payout Facility Liquidity To be listed For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

How to PPF Account extension after maturity

A PPF account can be retained after maturity without making any further deposits. The balance will continue to earn interest till it is closed. Public provident fund or PPF remains one of the most popular savings options for the long term despite a gradual decline in interest rates over the years. PPF accounts have a maturity period of 15 years and they can be extended. If there is no fund requirement, financial planners say, PPF account holders should extend the account beyond 15 years. In terms of income tax implications, PPF accounts enjoy the benefit of EEE (exempt-exempt-exempt) status . Under Section 80C, contribution up to Rs 1.5 lakh in a financial year qualifies for income tax deduction. The interest earned and maturity proceeds are also tax free. What are your options when a PPF account matures? 1) A PPF account can be closed after the expiry of 15 financial years from the end of the year in which the account was opened. 2) The subscriber can retain his

Indian Railways Seat Availability and Train Fare Enquiry

Enter the PNR for your train booking to find its status. Your 10 Digit PNR : Are you looking for Indian Railways Seat Availability information for trains between any two Indian Railway stations? Well, here is a detailed guide to find out seat availability and train fare information for journey between any two stations by any train on any chosen journey date. The holiday season is around and Indian all around are busy making Indian Railways Reservation .But before making the reservation, they would like to check berth availability information and here is a detailed step by step guide to check seat availability and train fare. How to check Indian Railways seat availability · 1. Go to the Indian Railways Passenger Reservation Enquiry page to check seat availability by clicking here [link] · 2. Enter the first few characters of the Originating Station against Source Station Name. For eg., if the origination station is chennai, enter "Che" against Sou

SBI Magnum Taxgain

Grown 37 times in 23 years- SBI Magnum Taxgain Scheme   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  SaveTaxGet Rich on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com OR Call us on 94 8300 8300  
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