Do you know about a reverse mortgage? It is still evolving in India but has several benefits. This type of mortgage is opposite of a traditional loan.
In a regular home loan, you pay the lender monthly installments towards repayment. In comparison, reverse mortgage loans are particularly aimed at senior homeowners, whereby they do not make any monthly repayments.
What is a reverse mortgage?
Based on the current market price, the condition of the home, and demand, the financial institution determines the value of your property. After completing the required checks, the property mortgage loan is sanctioned, and the lender makes regular payments to the homeowners after considering the price fluctuations and interest.
You may procure the loan monthly, quarterly, or annually as per your requirements. Alternatively, you may take the entire sanctioned reverse mortgage loan in India amount as a lump sum payout.
Guidelines associated with a reverse mortgage
- The maximum loan amount is limited to 60% of the property value
- Tenure may be between 10 and 15 years, some lenders offer up to 20 years
- You must be at least 60 years old to apply for a loan against property
- If your spouse is co-applicant, age must be at least 58 years
- The home must be free from all encumbrances, self-occupied, and self-procured
- It must be located in India with a life of 20 years and must be your primary residence
- The reverse mortgage loanrequires valuation every five years, in case the price increases, you may increase the amount
Repaying reverse mortgage loans
- In case of your demise or the end of the loan duration, the lender sells the home to recover outstanding amount and the accumulated mortgage loan interest rate. If there is any surplus balance, the same is paid to your legal heir.
- You must remember that the loan becomes due only on the demise of the last surviving borrower.
- Alternatively, it may be due if you sell the home or permanently move to an aged-care facility.
- You may also prepay the loan and the lenders may waive off any prepayment penalties.
Who may avail of a reverse mortgage loan?
- If you are a permanent citizen and do not plan to move
- When you own a ready to maintain home
- If you want to supplement your retirement income to meet additional expenses
An affordable loan against property interest rate is a boon for senior citizens. A reverse mortgage allows them to utilize their property to raise funds. This ensures they are able to meet their expenses even when they do not have a regular source of income. It enables them to be financially independent without depending on their children for money.
You may search online to understand how to get a loan against property. It is a simple and quick procedure.