What Is A Reverse Mortgage?

Reverse mortgage is a loan which provides additional source of income for senior citizens who have a self-acquired or self-occupied home in India. The borrower is paid payments by the lender against the mortgage.

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, the age of spouse should be more than 58 years.
• The borrower must have a fully owned house. In case of a couple, at least one of them must own a house.
• The property must have been in existence for at least 20 years.
• 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.

• Proof of Identity
• Proof of Residence or address
• Employer Identity card
• Property papers
• Account statement of the last 6 months for all bank accounts held
• Loan account statement of the last one year (if any)

Top 3 Tax Benefits On Reverse Mortgages

1. The income the borrower receives from the bank will be tax free.
2. 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.
3. The repayment of the loan at the end of the loan term will not be considered deductible.

7 Points To Remember In Reverse Mortgage

1. The maximum loan provided under this scheme can go up to Rs.1 crore
2. The minimum tenure of the loan is 10 years while the maximum tenure varies from bank to bank.
3. The borrower can either opt for monthly, quarterly, yearly or lump sum payments.
4. The property must be revaluated every 5 years by the bank or housing finance company.
5. The rates on a reverse mortgage vary from bank to bank and the type of loan the borrower has opted for.
6. The processing fee of a reverse mortgage varies depending on the bank.
7. 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

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.