Reverse mortgage is a home loan wherein the borrower will receive the loan amount in monthly instalments for a house he/she owns. This is the opposite of a home loan where the borrower would have to pay monthly instalments to the lender.
Reverse Mortgage Loan Eligibility Criteria
A reverse mortgage is available to anybody over the age of 60. In case a couple wishes to opt for one, at least one of the participants should be over the age of 60 years. Many banks require the other spouse to be 55 and above, while some require him/her to be at least 58.
The borrower must have a fully owned house. In case of a couple, at least one of them must own a house. In some cases, banks take over the home loan and pay off the balance in monthly instalments to the borrower.
The property must have been in existence for at least 20 years.
The property must be the permanent residence of the individual.
The property must be self-acquired, which means the property cannot be inherited or a gift.
Properties that are let out or being used for commercial uses are not eligible.
Documents Required To Avail Reverse Mortgage
The documents required to avail a reverse mortgage are mentioned below.
Permanent account number (PAN)
List of legal heirs
Top 3 Tax Benifits On Reverse Mortgages
The income the borrower receives from the bank will be tax free.
In the event that the house is renewed or repaired with this money, the amount spent on the renewal or repair will be eligible for deduction in computation of income.
The repayment of the loan at the end of the loan term will not be considered deductible.
9 Points To Remember In Reverse Mortgage
A reverse mortgage is available to citizens of India who are over the age of 60. In case of a couple looking for a reverse mortgage, at least one of the participants must be over the age of 60, while the other has to be over 55 or 58 years of age, depending on the bank.
The maximum loan provided under this scheme is 60% of the property cost, up to a maximum of Rs.50 lakh.
The minimum tenure of the loan is 10 years while the maximum tenure varies from bank to bank.
The borrower can either opt for monthly, quarterly, yearly or lump sum payments.
The property must be revaluated every 5 years by the bank or housing finance company.
The income received from a reverse mortgage will be tax free as it is considered a loan.
The rates on a reverse mortgage vary from bank to bank and the type of loan the borrower has opted for.
The processing fee of a reverse mortgage varies from 0.15% - 1.50%, depending on the bank.
A borrower can prepay the loan at any point during the term of the loan without attracting a prepayment fee, in most cases.
List Of Banks That Offer Reverse Mortgage Scheme
National Housing Bank (NHB)
Punjab National Bank (PNB)
Central Bank of India
Dewan Housing Finance Limited (DHFL)
State Bank of India (SBI)
LlC Housing Finance
Drawbacks Of A Reverse Mortgage Scheme
Lengthy documentation is usually required in order to avail a reverse mortgage.
The monthly amounts are fixed and there will be no provision to increase this amount.
Reverse Mortgage Scheme For Senior Citizens
Senior citizens looking for a stable source of income can benefit from a reverse mortgage. Not only do they receive a steady source of income, but their heirs would profit from this transaction in almost all cases as the property value is bound to rise overtime and outweigh the loan amount.
What Is A Reverse Mortgage In Simple Terms [With Example ]
Introduced to the nation in 2007, a reserve mortgage has been a blessing to many looking for a stable income in the current economy. Vaguely, a reverse mortgage is the opposite of a home loan. In a reverse mortgage, the borrower will receive the loan amount in monthly instalments for a house he/she owns, as opposed to a home loan where the borrower will have to pay off the loan in monthly instalments to the bank.
So how does the bank profit from this transaction? This can be explained in the following example. Let’s say that Mr. and Mrs. Raghav fully own a house worth Rs.1 crore in the city of Bangalore and are looking for a stable source of income as their two children haven’t begun earning yet. Aged 60 and 65 respectively, the Raghavs then opt to go for a reverse mortgage. On consulting with a bank, the bank agrees to approve a reverse mortgage of Rs.75 lakh for 15 years, payable in sums of Rs.42,000 monthly.
At 80, Mr. Raghav passes away of old age. However, his wife still lives in the house and his two children are old enough to financially support the family. A few years later, Mrs. Raghav too passes away at the age of 85. The tenure of the reverse mortgage has now surpassed the 15 years initially agreed upon and is now 20 years old. The loan has therefore grown and currently amounts to Rs.1 crore.
At this point, the property is then transferred to their children. The children now have two choices on how to go about closing the loan. They can either pay off the loan of Rs.1 crore and keep the property or they could sell off the property that will now be worth Rs.2.5 crore, pay off the bank and keep the difference. In this case, if Raghav’s children sell the house for Rs.2.5 crore, they will have Rs.1.5 crore for themselves after paying off the mortgage of Rs.1 crore.
In the event that the borrower of a mortgage loan doesn’t have a legal heir, the bank will simply take possession of the house, sell it off and make a profit out of it.
Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.
I have taken Home loan through Canara Bank directly .The rate of interest was 8 % it was very less according to my concern and not sure about the processing fee .This loan was sanctioned on time without any drawbacks .I have taken 17 lakhs for the tenure of 10 lakhs .I am totally satisfied with the service so far .
I have applied a Home loan through online. My application canceled by HDFC Limited because my net salary is Rs. 25k they said its not sufficient for the loan approval. Customer service was not so good, not so bad, it is average. I think, the rate of interest was 8-10%.
I have taken a housing loan from DHFL and the loan amount of Rs. 10,50,000 for the rate of interest of 9.8%. I am paying the EMI amount of Rs. 8500 for the tenure period of 15 years since its plot cum construction loan. Bank itself approved a loan within 3 days.
I have taken home loan directly through LIC Housing Finance .The rate of interest and the processing fee was quite nominal .This loan was sanctioned on exact time frame without any delay.This loan is still active and i have submitted the required documents as well .If EMI is paid on delay basis there will be extra charges.
I have taken a home loan from SBI and the loan amount was Rs. 30 lakh. The rate of interest was 8.15% and i am paying EMI of Rs. 25k. Customer service was good. I received this loan instantly and i applied this loan through online channel.There is no pre closure charges.
I have taken a home loan in MUTHOOT HOMEFIN LIMITED on one year before. The amount was offered of 6L which was sufficient as per my requirement. The tenure period of 7 years. My friend has suggested this finance to apply a loan. The process was smooth and sanctioned the loan within 15-20 days. Interest is nominal. Pre closure is applicable and part payment can be done of above 50K. It is nominal to pay for EMI.
I had applied for a home loan with ICICI Bank. They have taken my documentation and also completed the verification as well. The loan amount was Rs. 8.75 lakhs and the rate of interest was 8.6% i am happy with the interest.I received this loan instantly and i applied this loan through online channel.There is no pre closure charges.
I have taken Home loan directly through HDFC LTD .The loan amount was sanctioned on time without any delay .The agent shared all the details about the loan process ,I have submitted the required documents on time ,This loan is still active and there was difficulties faced so far .The loan tenure is for 5 years ,i have completed 1 year successfully and need to pay EMI for another 4 years.
I have taken home loan directly through HDFC LTD .The rate of interest was 8.25% it was nominal and all the details aboput the loan process was clearly explained by the agent .I have submitted the documents through the agent.I have got the loan amount sanctioned on time .I am satisfied with the service so far .
Was this review helpful?
Reviewed on Dec 05, 2019
I have taken Home loan directly through HDFC Ltd.The rate of interest and the processing fee was nominal .The loan amount got on time and there was no difficulties .This loan is still active and paying the premium through EMI basis without any hassle got this loan .I am completely satisfied with the service .
I have taken home loan directly from Oriental Bank Of commerce .The rate of interest and the processing fee was very nominal,I have got the loan amount sanctioned on time ,There was no drawbacks faced so far on using this service .From bank end all t he detail was shared and i am satisfied with the service .
I had applied for a home loan with HDFC Limited. The loan amount was Rs. 22,00,000 and the rate of interest was 8% when i was applied , but now it increased to 9.4% need to work in rate of interest. I am paying Emi monthly Rs. 18,500 and the tenure was 18 years. They have taken my documentation and also completed the verification as well executive supported me very nicely.
I have taken home loan directly through Home First Finance company India Pvt ltd.I have got the loan on time and the rate of interest was nominal .The documents was less and the agent clearly explained the loan process very clearly . This loan s still active and paying the premium.
I have taken home loan directly through ICICI Bank.The rate of interest and the processing fee was medium.I have got the loan sanctioned on time .The documents was very less and each and every detail was shared clearly by the agent .This loan is still active and there was no difficulties faced so far.
I have taken home loan directly through DHFL .The rate of interest and the processing fee was very high since had a requirement at that time taken this loan .This loan is still active and the loan got sanctioned on time .There was proper callback and follow up as well.Everything was ok but the service was average according to my point of view.
I have taken home loan which was taken directly through Union Bank of India .The rate of interest was less it was 8.5% and still this loan is active .I have got the loan amount without any delay .All the required details about this loan was shared by the agent. According to me the service is not satisfied .
I have taken home loan directly through Axis Bank .The rate of interest and the processing fee was nominal and the got the loan amount on exact time frame .I am paying the premium through EMI basis .All the detail about the loan process was clearly shared by the agent .I have submitted the required documents and the process was really satisfied .
I have taken India Infoline Housing Finance Limited directly .I have got the loan on delay basis it took 2 months of time and not got the reason for the delay .This loan is still active and there was no callback and follow up from India infoline .I have submitted the required documents and there was no drawbacks faced so far.
Bajaj Housing Finance tries all tricks to loot me -
1. Just before disbursement day, they hiked the Processing fee and increased the interest rate
2. After EMI stated, they suddenly hiked the EMI for one month by 20,000 due to a system issue at their end.
3. They arbitrarily deduct charges from your bank account in small amounts without telling and authorizations and randomly through a month.
4. Customer service and its Head are completely nonchalant and they fake ignorance.
5. It takes 5-6 months to resolve one issue. By that time, they will create another issue and you spend the next 5 months chasing them for its resolution.
Beware the NBFCs for housing finance. Its always better to go to the leading banks.
I have applied for Home loan directly through HDFC Limited .The rate of interest was very less it is only 8.35 or 8.55% criteria but i am not sure about the exact percentage .The premium is paid on EMI basis and got the loan amount on time and not faced any difficulties .I am totally satisfied with the service.