25th March 2013- The kind of mortgage in which a homeowner can have a loan of money against the value of his/ her house. No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold. After accounting for the initial mortgage amount, the rate at which interest grows, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan. how does reverse mortgage work.

Purpose:

For supplementing the cash flow stream of senior citizens in order to address their financial needs. A reverse mortgage provides income that people can tap into for their retirement. The advantage of a reverse mortgage is that the borrower’s credit is not relevant, and is often unchecked, because the borrower does not need to make any payments. Because the home serves as collateral, it must be sold in order to repay the mortgage when the borrower dies (in some cases, the heirs have the option of repaying the mortgage without selling the home). These types of mortgages have large origination costs relative to other types of mortgages. These costs become part of the initial loan balance and accrue interest. Senior citizen borrowers with good credit should carefully analyze the options of a more traditional mortgage, such as a home equity loan, against a reverse mortgage. In other word, reverse mortgage is a type of home loan that allows seniors to convert the equity in their home to cash to meet a wide range of financial needs. It is designed for homeowners, 62 years old or older. A reverse mortgage can be a solution for homeowners who may not qualify for a traditional home loan because of their limited income or poor credit rating. However, some types of reverse mortgages can include sizable truthful costs reverse mortgage calculator.

Salient Features

RML enables a Senior Citizen above the age of 60 years to avail of periodical payments from a lender against the mortgage of his/her house while remaining the owner and occupying the house. The loan amount is dependent on the value of house property as assessed by the lender, age of the borrower(s) and prevalent interest rate. RMLs are extended by Primary Lending Institutions (PLIs) viz. Scheduled Banks and Housing Finance Companies (HFCs) registered with NHB. Valuation of the residential property would be done at such frequency and intervals as decided by the reverse mortgage lender, which in any case shall be at least once every five years. reverse mortgage disadvantages The quantum of loan may undergo revisions based on such re-valuation of property at the discretion of the lender. reverse mortgage cons The borrower(s) will continue to use the residential property as his/her/their primary residence till he/she/they is/are alive, or permanently move out of the property, or cease to use the property as permanent primary residence.

Eligibility

Should be Senior Citizen of India, above 60 years of age. click here Married couples will be eligible as joint borrowers provided one of them is above 60 years of age and age of spouse is not below 55 years at the time of application. Should be the owner of a residential property (house or flat) located in India in his/her own name.

Maximum Amount

The maximum loan amount inclusive of interest for entire tenure of the loan shall be restricted to Rs. 1 crore subject to value of the property.

Repayment of Loan:

The loan shall become due and payable when the last surviving borrower dies or would like to sell the home / permanently moves out of the home for aged care to an institution or relatives. The loan will, as such, become due for recovery and payable.

About reverses mortgage

While many of use have heard the words reverse mortgage, some may wonder what is a reverse mortgage. Here is some information about reverse mortgages. Simply put, it is a type of loan available to seniors who are over 62 and who own their homes. It allows one to borrow the equity in their home in order to use that money now. The loan becomes due when the homeowner no longer lives in the home.

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