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Wednesday, 12 March 2014

60. REVERSE MORTGAGE - (Published in WOMAN'S ERA March (First) 2014 Issue)


Your property for a stress-free old age

By Ranjana Bharij

Woman's Era  March ( First) 2014 Page 42
One of the most useful but least publicised of loan schemes for the senior citizens in India is Reverse Mortgage Scheme. The concept is comparatively new but very useful for the senior citizens in need of financial support in the evening of their lives.
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.
Woman's Era  March ( First) 2014
The first question that arises in one’s mind is whether he/she is eligible for the loan under this scheme called Reverse Mortgage Loan. Anyone is eligible to take a loan under this scheme provided he/she is a senior citizen residing in India and is above the age of 60 years and provided the residential property is in his/her name. It does not matter whether the property is self-acquired or inherited if the title is clear and if it is free of encumbrances. The important factor is that it has to be a self-occupied residential property. A commercial property is not eligible for loan under Reverse Mortgage Scheme.
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. 


Woman's Era  March ( First) 2014
Woman's Era  March ( First) 2014

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