A reverse mortgage is a product that’s structured around the needs of senior citizens for regular income. What’s more, the legal heirs can repay the loan and retain the property.
You may want to know what a reverse mortgage is and how it can help you remain independent. Here’re the major points.
WHAT ARE THEY?
Reverse mortgages are products that have been structured around the need of senior citizens for a regular income. Instead of approaching a bank for a loan, which you have to pay it back as installments, a reverse mortgage allows you to mortgage your house to a bank or a housing finance company, which pays you a regular amount at regular intervals. This amount can be used for fulfilling your needs excluding any speculative or trading activity. Some of the banks/housing finance companies which provide reverse mortgage services include LIC Housing Finance, Dewan Housing Finance, Punjab National Bank, State Bank of India and Axis Bank.
ELIGIBILITY CRITERIA
To avail of a reverse mortgage, you either need to be a male above 60 years of age or a female who is above 55 years of age. However, if you want to jointly avail of the loan, either one of the partners needs to be above 60 years. Apart from the age of the person, the amount of the loan also depends on the time period and the value of the property. Loans are available for about 15 years. Installments could either as periodic payments (monthly, quarterly or annual payments) and sometimes as lump sum payments. However, lump sum payments generally given out only for medical needs.
(E)VALUATION
Banks have their own valuation experts who will determine the value of your house. But an important criterion that banks look for is that the residential property should not have any encumbrances. You should have a clear title to the property and must be living in the house. Moreover, the property should not be involved in any type of litigation. Banks are willing to give between 40-60% of the value of the property, subject to a maximum of Rs 50 lakh. The older you are, the greater your chances of getting a higher percentage. If you live in an area where the prices are rapidly increasing, you need not fear that you will lose out on the benefits. The bank either performs annual asset verification or at least once every five years. If you desire, the bank may modify the loan amount keeping the revised rates of the property in mind.
LIVE AT HOME
A very re-assuring aspect about reverse mortgage is that it doesn’t force the couple to move out of the home as soon as the house is mortgaged with the bank. They are allowed to occupy the home till both the partners pass away or they are permanently moved to another location like an old age home. If one of the partners outlives the period of the loan, the regular amount that comes will be stopped but the person can continue to live in the house. After both partners die, the bank gives the legal heirs a chance to pay the outstanding loan amount with interest which currently ranges between 11% and 12%. If they do not show any interest, then the bank proceeds with selling the home. If the sale proceeds are above the outstanding amount, then the bank returns the excess amount to the legal heirs. The option to pre-pay the loan also exists. However, banks/ housing finance companies may/ may not levy a pre-payment penalty, depending on their discretion.
You may want to know what a reverse mortgage is and how it can help you remain independent. Here’re the major points.
WHAT ARE THEY?
Reverse mortgages are products that have been structured around the need of senior citizens for a regular income. Instead of approaching a bank for a loan, which you have to pay it back as installments, a reverse mortgage allows you to mortgage your house to a bank or a housing finance company, which pays you a regular amount at regular intervals. This amount can be used for fulfilling your needs excluding any speculative or trading activity. Some of the banks/housing finance companies which provide reverse mortgage services include LIC Housing Finance, Dewan Housing Finance, Punjab National Bank, State Bank of India and Axis Bank.
ELIGIBILITY CRITERIA
To avail of a reverse mortgage, you either need to be a male above 60 years of age or a female who is above 55 years of age. However, if you want to jointly avail of the loan, either one of the partners needs to be above 60 years. Apart from the age of the person, the amount of the loan also depends on the time period and the value of the property. Loans are available for about 15 years. Installments could either as periodic payments (monthly, quarterly or annual payments) and sometimes as lump sum payments. However, lump sum payments generally given out only for medical needs.
(E)VALUATION
Banks have their own valuation experts who will determine the value of your house. But an important criterion that banks look for is that the residential property should not have any encumbrances. You should have a clear title to the property and must be living in the house. Moreover, the property should not be involved in any type of litigation. Banks are willing to give between 40-60% of the value of the property, subject to a maximum of Rs 50 lakh. The older you are, the greater your chances of getting a higher percentage. If you live in an area where the prices are rapidly increasing, you need not fear that you will lose out on the benefits. The bank either performs annual asset verification or at least once every five years. If you desire, the bank may modify the loan amount keeping the revised rates of the property in mind.
LIVE AT HOME
A very re-assuring aspect about reverse mortgage is that it doesn’t force the couple to move out of the home as soon as the house is mortgaged with the bank. They are allowed to occupy the home till both the partners pass away or they are permanently moved to another location like an old age home. If one of the partners outlives the period of the loan, the regular amount that comes will be stopped but the person can continue to live in the house. After both partners die, the bank gives the legal heirs a chance to pay the outstanding loan amount with interest which currently ranges between 11% and 12%. If they do not show any interest, then the bank proceeds with selling the home. If the sale proceeds are above the outstanding amount, then the bank returns the excess amount to the legal heirs. The option to pre-pay the loan also exists. However, banks/ housing finance companies may/ may not levy a pre-payment penalty, depending on their discretion.
ELIGIBILITY CRITERIA
- Males - Above 60 years
- Females - Above 55 years
- Couples- One spouse above 60 years
- Home should be primary residence
- Have a clear title to the home
- Home should not be involved in litigation
ADVANTAGES
- An assured income for about 15 years
- Continue to live in your home
