Once we cross an age of 60, our second innings starts with our retirement from our job. However, before wrinkle coming on cheeks, starts coming on forehead. The immediate question that strikes the mind is how are we going to support ourselves. In certain cases, where people are having their savings for bread and butter, but fall short of money to fulfill their desires which they kept hoping all their life. I have seen couple of them need to start working in small time organizations definitely not of their stature and choice. But now there is a solution for them in the name of Reverse Mortgage Loan.
Features
For the benefit of senior citizen, this scheme of reverse mortgage has been introduced recently. The main aim is to support people above age of 60 and not having adequate income to meet their needs. As such being a home owner, you may turn the equity in your home into one lump sum or periodic payments as per your need and an agreement with the banker. No repayment is required during the survival of the borrower. However, borrower should ensure that the property should be clear from encumbrances along with clear title of the borrower. Also, borrower should pay all taxes relating to the house and maintain the property as his primary residence.
Eligibility
The main factors for determining the loan amount are borrower’s age, valuation of the property, current interest rates and chosen plan of mortgage. As a thumb rule, higher the age, higher the value of the home, the greater will be the loan amount. The valuation in case of these residential property are done at periodically. As such banks may revise the periodic or the lumpsum amount accordingly based on revised valuation. In case of married couples, at least one of them being above 60 years of age to avail this loan where eligibility will be as joint borrowers. Still, the age criteria for the couple would be at the discretion of the lender or bank.
Repayment
The loan shall become due and payable only after the death of last surviving borrower. This means that in case of married couple, the repayment of both husband and wife. Alternatively, while surviving they need to repay if they decide to sell the property or move out from the property permanently. After the death of the home owner, the legal heirs, like their children have the choice of repay the loan from their own resources or by selling the property. In case, if they decide to sell the house, the proceeds of the sale would be used to repay the mortgage, with the balance funds will be given to the heirs.
Few important terms for this scheme as formulated by National Housing Bank (NHB) stand as
1. The maximum period of the loan period is 15 years.
2. The residual life of the property should be at least 20 years.
In case where the borrower lives longer than 15 years, lender will not make any further periodic payments. However, the borrower can still occupy the property. On the tax front, from FY 2008-09, these lump sum amount or periodic payments received on reverse mortgage loan will not attract income tax or capital gains tax.
With such benefits, it is coming as a beautiful product and ideal choice for elderly people to live the real life after their retirement.
