REVERSE
MORTGAGE
Your
property for a stress-free old age
By
Ranjana Bharij
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| Woman's Era March ( First) 2014 Page 42 |
Despite
meticulous retirement planning, a senior citizen may suddenly find himself
short of funds and without any means to borrow from anywhere. The need for
financial support may arise on account of any unforeseen circumstances. But not
having sufficient funds today is not a handicap for any senior citizen anymore
if he/she owns a property in his/her name.
Under
Reverse Mortgage Loan Scheme, a senior citizen can take a loan from the Bank
without hesitation and without having to explain the rationale for the
expenditure to anyone. The best part of the scheme is that for being eligible
for this loan, one need not have a regular source of income either. Moreover, one
does not even have to repay this loan if one does not want to or cannot. One
can continue to live in one’s house and keep withdrawing the needed amount from
the Bank from time to time or in lump-sum. The house eventually pays up the
loan on its own.
Does
this sound incredible? Let us understand the scheme in detail.
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| Woman's Era March ( First) 2014 |
The
loan is usually given for unforeseen medical expenses, for meeting day to day
financial needs, for repair or renovation of the house and for all such genuine
needs of old age which are not speculative in nature. The loan can also be taken
jointly with the spouse. An interesting feature of the scheme is that one need
not have any regular source of income.
Just
like any other loan, the lending bank will require some security. For a loan
under Reverse Mortgage Scheme, the borrower will be required to mortgage his self-occupied
residential property to the bank. Although the property is mortgaged to the
Bank, the borrower can continue to stay in the house without any problem during
his entire life-time or till such time as the property remains in his name.
The
quantum of the loan may vary from Bank to Bank. It can be from Rupees 50 lacs
to 2 crores or more depending upon the value of the property and age of the
borrowers. Value of the property is usually taken as 75% to 80% of its disposable
market value as assessed by the bank and the tenure of the loan which is usually
not more than 20 years.
The
Bank gives the amount of loan to the borrower as per his/her requirement. The
payment could be quarterly, half-yearly, annual or in lump-sum.
Another interesting feature of this
loan is that one does not have to repay the loan if one does not want to. It is
self-liquidating. A borrower taking a Reverse Mortgage
Loan can continue to live in his house despite taking the loan as no repayment
is required to be done during his lifetime.
The loan is recovered only after the death of both the spouses.
The
repayment of the loan usually becomes due six months after the death of the
last surviving borrower/spouse. After
the death of the borrower(s), the legal heirs are given the first option to repay
the loan and take back the property within six months without sale of the
property. If they fail to do so, the bank realises their
dues along with accumulated interest by disposing of the property. If some surplus amount is
available after adjustment of the loan and interest after sale of the property,
it is given back to the legal heirs by the bank.
*****
(Published in WOMAN'S ERA March (First) 2014 Issue)
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| Woman's Era March ( First) 2014 |
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| Woman's Era March ( First) 2014 |
10 comments:
Very useful information. This scheme deserves to have better publicity.
---Varsha Uke Nagpal
It is good that you have discussed that some product like Reverse Mortgage existed otherwise many would have forgotten. No bank is marketing it.
---Rajesh Ailawadi
Great Ranjana Bharij - it is such a useful piece of information to disseminate - maybe people like us who have spent most or our lives in the SBI know about it as we enter the sunset days of our lives - but I am sure that there are many many people who don't know about it. It has always been that streak of caring in you that surfaces always and thank you for putting the article in the 'Women's Era' - it is widely read and I am sure that many women will be given courage and hope after reading your article.
---Deepak Menon
A well written article. Maybe you should have mentioned the biggest drawback in the scheme - viz. You lose the house at the end of the 15 or 20 year period. In the West this is taken care of by a reverse insurance - an insurance policy where the insurance company will pay you only if you survive and will pay nothing if you die. By paying the insurance premia from a part of the mortgage receipts you can ensure the insurance receipts will adjust your loan on maturity and you will never lose the house while you live. We need to create an awareness so that such an insurance product can be introduced in India.
---Pankaj Varma
Sir,can insurance be done after 65,if so it can be attractive scheme,still thanks for revising our memory,Ranjna ji.
---SK Kapoor
In the west reverse insurance is done only for old people and only in conjunction with reverse mortgage.
---Pankaj Varma
Worth reading article.
---SD Sharma
Informative article. This needs to be popularized among senior citizens
---BK Arora
Well explained article and worth reading.
---Arun Kaushal
Nice article. However, rate of interest (the range) could have been mentioned.
---Vijay Kumar Chopra
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