Reverse Mortgage Loan
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The Reverse Mortgage loan Scheme is helpful particularly to senior citizens who own a house/residential property but are not willing to sell it in order to gain financial stability. This is the case with many people as the financial crunch upsets them as they require money to fulfill their daily requirements/medical emergency/ renovation of home and for many other reasons.

The term Reverse Mortgage Loan Scheme itself is new to many age-old people but the launch of this loan by the Government of India gave many senior citizens a reason to smile. So, take a look at what this loan is all about and how to apply/repay the same.

Concept of Reverse Mortgage Loan

The reverse mortgage is completely different from a home loan. This loan allows partial disbursal of the loan amount. This partial release falls mainly under three categories which are:

  • Installment
  • Lumpsum
  • A Credit Line

However, the borrower is required to pay back the entire loan amount in one go means he/she has to return the entire loan amount in one-time payment.

The loan amount for approval depends upon the value/cost price of the house. The age of borrower and interest rate are the other two factors that are taken into consideration before sanctioning the reverse mortgage loan. Under this loan, a maximum of rupees 50,000 in installments and 50 percent or rupees 15 lakhs can be sanctioned to the borrowers under the Lumpsum disbursal. These releases of funds are only allowed if the borrower or his/her spouse has to undergo any medical treatment.

Like said earlier, the money borrowed under the reverse mortgage loan can be used to fulfill daily requirements/medical emergency/ renovation of home and for repayment of the home loan taken for the same property. But, this money cannot be used for business or trading purposes. Interestingly, people can also opt for a Reverse mortgage loan scheme to purchase an annuity from a life insurance company. As in this case, the lender bestowal the Lumpsum amount to the Life insurance Company directly in return to which the borrower can purchase an annuity.

Eligibility and Documents Required for Reverse Mortgage Loan:

  • Firstly, the applicant must 60 years or above. In case the person is applying jointly, then the spouse should 55 years of age or more.
  • The residential property or the current living home should be entitled onto the name of borrower and co-borrower in case of joint application.
  • The person is eligible to apply only for the primary home and not on second home or leased plot/residential flat.
  • Any property with an ongoing loan is not eligible for a Reverse Mortgage loan Scheme until the entire outstanding loan is paid off.
  • A person is required to submit his/her PAN Card copy.
  • List of legal heirs and a copy of your registered will.
  • Intimation about modification in the will in future.
  • Basic details filled up with the application form of Reverse Mortgage loan.

Tenure of Reverse Mortgage Loan:

This loan can be availed for a maximum of 20 years. The borrower can receive the loan amount in Lump sum or in installments in this period as per requirement. A person can also stay in the residential property/ home during this time period and after the completion of this tenure. After the death of a borrower his/her spouse is allowed to stay in this property till her/his death.

Repayment of Reverse Mortgage Loan:

If the borrower wishes to discontinue the loan then, he/she can pay-off the outstanding amount anytime as the prepayment charges are not applied under this loan scheme. In case you want to discontinue the loan, you can prepay the outstanding amount at any time without worrying about prepayment charges. This is so because the senior citizens usually don’t have any income for both themselves and spouse. Although, the legal heirs have the right pay off the outstanding amount after the borrower’s death in order to take the custody of house/residential property.

The bank has the right to sell this house/residential property if the legal heirs do not showcase an interest in paying off the outstanding loan amount. But, the bank has to transfer the surplus amount earned by selling the property to the legal heirs.

Interest Rate of Reverse Mortgage Loan:

The rate of interest varies from lender to lender so you must check the interest rates with various banks before agreeing to anyone.