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

Retirement planning from a long-term perspective

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds     `HOW green was my valley'. This title comes from a movie I had watched many years ago. A little boy's journey into adulthood and the story of a Welsh valley's turn of-the-century descent from pristine paradise to despoiled coal mining.   I thought of the title because it is comparatively reflective of a person's life ­ the glorious years when he is earning and the sun down years when he is not having his regular job and, hence, his living standards comes down. The reason is a combination of things. Inflation of food items, transport, increase in health related costs in the later years of life and increase in expenses in almost all basic amenities of life. In India, the social security system is almost non-existent. In some states, wherever it is available, the scales of benefits are extremely modest...

BHIM App

What is BHIM? BHIM stands for Bharat Interface for Money , which is an easy way of transferring money from one bank account to an other via a smartphone using the Unified Payments Interface (UPI) platform . It is an instant payments application meant for sending money as well as requesting for payments. How is it different from UPI? BHIM is no different than UPI. But in the case of BHIM, customers don't have to download mobile applications of multiple banks, instead a single BHIM app downloaded from Android Play Store is sufficient. Other than that, payments can be made through a virtual payments ID or through account number and IFS code, same as UPI. What you need to use BHIM? BHIM can be used across an droid smartphones with version 4.0 and above, also it will be made available on iPhones and Windows smartphones very soon. Further, for feature phone users they need to use the USSD feature by dial ing *99#. Why was the need for BHIM felt when UPI is already in place? With various...

NPS for Tax Saving

The NPS is a great way to save tax if you don't mind locking in your money till you retire. Till last year, the taxability of the NPS was a big issue. But last year's Budget changed the rules and made 40% of the corpus tax free. The PFRDA wants that the balance 60% to be exempt from tax as well. The emphasis is on increasing pension coverage. So, allowing EEE status (to NPS ) is our major demand (in the Budget NPS is especially useful for investors who may have exhausted the `1.5 lakh investment limit under Section 80C but want to save more.   Another way the NPS can cut tax is by rejigging the salary.If a company deposits up to 10% of the basic salary of an employee in the NPS under Section 80CCD(2d), the amount will be tax free. Turn to page 28 to see how much tax this can save. However, the take-home pay of the employee will come down. 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 10 Tax...

SBI Long Term Advantage Fund Series

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 10 Tax Saver Mutual Funds for 2017 - 2018 Best 10 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. ICICI Prudential Long Term Equity Fund 5. Birla Sun Life Tax Relief 96 6. Franklin India TaxShield  7. Reliance Tax Saver (ELSS) Fund 8. BNP Paribas Long Term Equity Fund 9. Axis Tax Saver Fund 10. Birla Sun Life Tax Plan 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 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  

ELSS Funds are Best Tax Saving Option

Equity-linked saving schemes (ELSS) are the best way to save tax in 2017 . The Economic Times assessed 10 tax-saving options on eight key parameters, including returns, safety , liquidity , costs, transparency , flexibility , ease of investment and taxability of income. ELSS funds scored highest, followed by the National Pension System (NPS) and Ulips at the second and third place, respectively . The terrific returns generated by ELSS (CAGR of 18.7% in past three years and 17.46% in past five years) are not the only plus point of these funds. Their costs are very low (2.52.75% a year) and all charges, portfolios and transactions are in the public domain. Returns are tax free because long-term capital gains from equity funds are exempt and they have the shortest lock-in period of three years. Investing in ELSS funds has now become very easy with the launch of the e-KYC facility . The whole process does not take more than 30-35 minutes. The Pension Fund Regulatory and Development Aut...
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