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  • Category: Miscellaneous

    Do you know about reverse mortgage loan offered by the banks?

    Reverse mortgage loan (RML) was introduced in India in 2007. Only a senior citizen (60 years or above) who owns a residential property can opt for this loan. Factors like age of the applicant, value of the property, current interest rates and the specific plan chosen etc. are considered for calculating the loan amount. Also the residual life of the property should be at least 20 years. It is called reverse mortgage because the lender is making payments to the borrower. The loan amount is disbursed to the borrower in the form of periodic payment. The loan need not be paid back till the home is sold or vacated. The borrower must however pay the property taxes, insurance and other dues.

    After the death of the borrower, the legal heir will have the chance to settle the loan along with the interest without having to sell the property.

    What are your observations about reverse mortgage loan?
  • #629605
    There are two variants of reverse mortgage loan available. The one is regular RML and the other one is reverse mortgage loan-enabled annuity (RMLeA). If someone opts for a regular RML, he will either get a lump sum amount or instalments, depending on the frequency he has selected for. It is like a loan-against-property. The difference in RML is that there is no compulsion to pay back the money at the end of the tenure. The tenure of this loan is 20 years. At the end of the tenure, the lender will no more pay any money. There is no necessity to repay the loan amount during the lifetime of the borrower or as long as the borrower lives in that house.
    This is not very popular in our country. This is useful for people who don't have any income but own a house. Many old people will have an attachment to the house they lived in or the house they got constructed. As such, they won't prefer this. But I feel it is good for the old who are not getting the required care for their children. They can get money for their expenses.

    drrao
    always confident

  • #629648
    I have heard about it,and read about it since it was allowed in our country.

    But I have not yet met any one who has availed a reverse mortgage loan. I have not seen any bank advertise that also.

  • #629701
    On the website of the State Bank of India, RML is described well under 'Home Loans'.
    It is not popular in India because of -
    1. Emotional attachment to the property
    2. Lack of awareness
    3. Lack of understanding of the product

    Let us encourage each other in sharing knowledge.

  • #629752
    In simple terms, a Reverse Mortgage enables a senior citizen to receive a regular stream of income from a lender (a bank or a financial institution) against the mortgage of his home. It seeks to monetize the house as an asset and specifically the owner's equity in the house.

    Although this enables someone being old & at the same time not capable of regular income but still the person must be gone through other terms & conditions before opting this. It's good to know that whether this got limited with a time period or will continue till the person has got life. So the policy can't be the same in all the banks or the financial institutions but may differ.

  • #630116
    As the cost of living goes up and more and more families become nuclear, this option could be more commonly used by elderly parents provided they are aware of it. I think this may not be favorable for children in India because often the property is sold and divided or transferred or held up in sibling litigation. Moreover, if the legal heirs want the property back, they have to clear the dues to the bank. Who and how will they pay? would also be an issue.

    Generally, there should be a clear title deed, larger the property, self-occupied. The amount is not a huge amount.
    For instance, if a house worth Rs 1 crore is granted a reverse mortgage loan, the individual would get around Rs8200-Rs8500/month for 20 years. This would give a rough idea of about how much we would get in hand. The author can correct me if I've misunderstood the payout.


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