How Do Reverse Mortgage Loans Make Oldies Life Easy?
By Anupama Deshpande | Oct 12, 2018

A reverse mortgage loan, introduced by the Union Government and introduced the National Housing Bank in May 2007, is the opposite of a conventional home loan. In case of conventional home loan, the borrower avails loan from a lender and repay monthly instalment (EMI) during whole loan tenure. As opposed to it, in a reverse mortgage loan, a senior citizen mortgages his/ her house with the lender and receives a regular stream of income from a lender (a bank or a financial institution) against this mortgage of house. Here are the details mentioned below as to how do reverse mortgage loans make oldies life easy?

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• Especially designed for Senior Citizens
• Can be availed by those oldies that have a lack of regular income or financial support from children
• Provides regular stream of income against the mortgage of house by the senior citizens
• Allows the borrower to reside in the mortgaged property till the end of his/ her life and receives a periodic payment on it

• The applicant should be a resident Indian and above 60 years of age
• The applicant must be the owner of a self- acquired, inherited or self occupied residential property
• The residential property should be located in India
• Property Value to be assessed in every 5 year
• Maximum loan amount is approximately up to 60% of the value of the residential property
• Minimum tenure of the mortgage is 10 years and maximum is 20 years
• Loan can also be repaid in monthly, quarterly and yearly instalments or in lump sum

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• It provides an additional source of income for senior citizens of India, who have a self-acquired or self-occupied home in India.
• Reverse mortgaging will not deprive you of the benefits of appreciation in the value of your house.
• Amount received through reverse mortgage is a loan and not income. Hence it will not attract any tax.
• The borrower is not expected to service the loan during his/ her lifetime
• It is available at low interest rate, less processing fee and no prepayment penalty
• It can be availed jointly too

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In case of Reverse Mortgage Loan, first the value of the mortgaged property is determined by lender's authorized professional valuers. The mortgaged property value is assessed on the basis of following factors:

• Current property prices
• Present condition of the property
• Demand for the property
• Location of the property

After assessment of property value, usually loan upto 60% of this value is approved by the lender. The lender then disburses a loan amount to the borrower in the form of periodic payments.

Reverse mortgage interest rates could be either fixed or floating. Currently, reverse mortgage loans are available at 9% to 13% interest rate. There is one option that anyone can repay the loan prematurely also without any prepayment penalty.

The loan tenure, which can be between 10 and 20 years and is dependent upon the age of the borrowers. Some of the lenders also offer reverse mortgage enabled lifetime annuity plans.

• The borrower is required to live in the mortgaged property. If he does not live in the house for a continuous period of 1 year, then the bank has the right to foreclose the loan.
• The borrower has to pay property tax every year
• The borrower should maintain the mortgaged house so that its value does not reduce
• The mortgaged house should be insured and the borrower needs to pay the insurance premium for the same.
• Mortgaged house is re-valued in every 3 to 5 years and the loan amount is accordingly adjusted. If the value of the house increases, borrower will get a higher monthly income or can avail additional lump sum payment. In case the market price of the property comes down, the lender will reduce the loan amount.