In a traditional mortgage or housing finance, the borrower repays the availed amount over a scheduled tenor. On the other hand, the reverse mortgage is the opposite of the regular mortgage.
The reverse mortgage is a financial product that has been created for retired senior citizens. They can use it and support themselves financially and have properties.
What is Reverse Mortgage?
In a reverse mortgage facility, a retired or senior citizen mortgages his/her property to a bank or non-banking finance company (NBFC). In turn, the lender makes periodic payments to him/her to help him meet multiple needs in life.
Unlike a housing finance facility, the borrower is not needed to make regular EMI payments towards the principal and interest to the bank.
Additional Read: Will reverse mortgage lending limits rise in 2019?
How does the Reverse Mortgage work?
If you are new to the term ‘reverse mortgage’ and want to know how it works, here are quick insights into its working mechanism.
Step 1 – The borrower mortgages his/her home to the lender such as banks and other lending authorities.
Step 2 – The borrower receives monthly payments from the lender for the final duration of the mortgage. During the reverse mortgage duration, the ownership of the property vests with the borrower.
Step 3 – The borrower dies. The home loan is paid by legal heirs. and the house is handed over to legal heirs. Even if the loan of the bank is not paid due to some reasons, the bank has the power to auction the home and recover its dues
What is Reverse Mortgage Eligibility Criterion?
Many lenders in India offer the reverse mortgage facility to retirees and senior citizens who are looking for a stable source of income. Have a look:
- The age of the applicant should be at least 60 years
- If you are a couple applicant, one of the applicant’s age should be 60 years, and other’s should be between 55-58 years
- The property needs to be fully owned by the applicant, and the age of the home needs to be at least 20 years
- The property being used for the reverse mortgage should be the permanent resident of the individual and needs to be self-acquired. It should be inherited or be a gift from someone else
- Your property which has been sublet or being used for any commercial purposes don’t fit to be used as the one for reverse mortgage
The reverse mortgage facility is available only for senior citizens.
Are you are a young self-employed or salaried professional? Do you have properties and need some high loan amount to fund multiple needs?
You can apply for the loan against property and get up to Rs.1 crore for salaried and up to Rs.3.5 crore for self-employed.
The loan against property interest rate is lower as the property is kept as the collateral, helping you to repay the loan in smaller EMIs.
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