Your golden years are for relaxation. But inevitably, taking care of health, lack of regular income, or proper financial support can leave you worried about your post-retirement life. While income savings schemes or fixed deposits can come in handy, a home loan can help generate surplus income for a cushy life. An additional option that senior citizens have is a reverse mortgage loan. Let’s learn more about this.
What is a reverse mortgage loan?
Simply put, a reverse mortgage is the opposite of a regular home loan. With the latter, you (the borrower) pay monthly EMIs to the lender, whereas in the former, the senior citizen puts their house on mortgage, and a financial institution gives them a regular amount as a payout. This helps them make up for the lack of regular income and meet expenses.
What is the eligibility for a reverse mortgage?
You can avail of this loan if you’re an Indian senior citizen above the age of 60 and own residential property. This property should be jointly or fully in the borrower’s name.
What is the tenure of the home loan?
Typically, it’s anywhere between 10 to 15 years in India, although it depends on the borrower and the financial institution.
What is the loan amount?
The amount you can secure for your reverse mortgage home loan depends on your age and your property value (60% of the total value of the residential property). Again, this differs from lender to lender.
What is the mode of disbursement?
As the borrower, you have the choice to pick from a combination of options. You can choose periodic payments that will be made monthly, quarterly, half-yearly, annually, or a lump sum amount. You can discuss with your lender and determine a payout option that suits your needs.
What are the home loan interest rates?
The interest rate depends on many factors. The easiest way is to use a home loan EMI calculator that will help you determine your loan amount, home loan interest rates, and loan duration as well.
How do you pay back a reverse mortgage loan?
Unlike a regular home loan, as the borrower, you don’t need to instantly pay your EMIs back. With reverse mortgages, you don’t make payments during the tenure of the loan. You only pay back when you sell the house or move out of the house. And in case of the borrower’s death, the house goes to the legal heir, who then pays back the loan. In the event the loan is not paid, the bank can auction the house to recover the loan amount.
Benefits of a reverse mortgage loan
One of the biggest advantages of a reverse mortgage loan is the social security and mental peace it offers. This loan allows senior citizens to be financially independent without worrying about a shortage of funds or having to ask children. This independence is especially useful during medical emergencies; you know you have resources you can rely on at a time of need. Further, there are no end-use restrictions for the funds, so you can use them in any way you like. Lastly, not having to pay back the loan during your lifetime can be a huge relief – there’s no worry about home loan interest rates or payment dates.
Conclusion
The reverse mortgage loan is one of the best alternatives for senior citizens rather than moving out of their own house or selling it for additional or fixed income.
While the word ‘loan’ can instill fear in the elderly, this product does the opposite. By thoroughly understanding how this product works and its advantages, you can truly reap its benefits.
