Reverse Mortgage Loan

Document Required for Reverse Mortgage Loan

Given below is the list of documents you will have to submit in order to avail a reverse mortgage loan from a bank in India:

1. Identity proof such as voter id, PAN, Aadhaar, passport, etc.
2. Address proof such as utility bills, Aadhaar, Passport, etc.
3. Proof regarding the ownership of the property. You can submit documents like the property tax receipts, utility bills, title deed, etc.
4. Last 6 month's bank account statement.
5. If you have availed any loan from any lender, then the account statement for the last 12 months.
6. Passport size photographs.
7. Proof of income such as IT returns for past 2 financial years, salary slip for the last 3 months, TDS certificate, balance sheet and profit, loss account for last 3 years (only for self-employed), etc.
8. Income documents such as copy of form 16, ITR returns for the last two years or salary slip for the last three months.
9. Qualification certificate in case you are a CA, Doctor, Lawyer, Architect, etc.
10. NOC in case you have availed a loan on the property.
11. Occupancy certificate in case of ready to move in property.
12. Relevant property papers such as development agreement of the builder, conveyance deed in case the property is new, approved plan copy, etc.
13. It is mandatory for Property owners in Maharashtra to submit the registered agreements for share and sale certificates.

Know more about Mortgage Loan

How does Reverse Mortgage Work?

A reverse mortgage loan's quantity depends on a number of variables, such as supply and demand, market dynamics, and interest rates. All of these factors work together to influence the collateral property's value.

The Mortgage Process for a Property: Seniors who are 60 years of age or over can easily get a bank to mortgage their own property. They receive a consistent income from this easy process, guaranteeing their financial security in their later years.

Frequent Bank Payments: Borrowers receive a set loan amount from the bank at regular times after mortgaging their property. To help them meet their financial demands, this function provides a steady and reliable source of revenue.

Reduction in Property Equity: Borrowers' equity in the mortgaged property steadily declines as they make payments. This reduction is in line with how the loan revenues are being used, guaranteeing a sound financial strategy.

Benefits of Reverse Mortgage

The benefits of Reverse Mortgage are given below:

Being Financially Independent: Seniors can become financially independent and no longer rely on their offspring thanks to reverse mortgages. Depending on their specific circumstances, borrowers are free to use the money however they see fit.

Minimal Conditions for Eligibility: Applying for a reverse mortgage loan is simple for seniors who own residential real estate and are 60 years of age or older. The borrower's name, either alone or in conjunction with their spouse, must be on the property.

Extended Tenure: Long terms offered by reverse mortgages provide a consistent revenue stream, assisting senior individuals in easily handling regular expenses.

Revaluation of Properties: Every five years, banks reevaluate the value of the property. Borrowers can get a larger lump sum and raise the loan value if the property appreciates.

Tax Advantages: Money obtained through a reverse mortgage may be deductible from taxes under the Income Tax Act of 1961. However, if the property is sold to pay back the debt, capital gains tax is due.

Many people are hesitant to mortgage their property because they want to leave it as an inheritance for their children, even with these advantages.

Other Types of Mortgages

Simple Mortgage: This is when a borrower offers their property as security for a loan. If they fail to repay, the lender has the right to sell the property to recover the loan amount.

Mortgage by Conditional Sale: This involves selling a property with the condition that the sale becomes final if the loan is not repaid. It functions as a sale with a safety clause.

Usufructuary Mortgage: Here, the lender enjoys the benefits of the property, such as rent or occupancy, until the loan is fully repaid.

Mortgage by Title Deed: In this type, a formal document (title deed) is signed to use the property as security for the loan. The process is clear and legally documented.

English Mortgage: This involves temporarily transferring the property’s title to the lender. The title is restored to the borrower once the loan is fully repaid.

Anomalous Mortgage: This refers to a mortgage arrangement that doesn’t fit standard categories but serves a specific purpose, such as using unconventional assets as collateral.

Reverse Mortgage Loan Fees and Charges

The fees and charges for Reverser Mortgage Loan are given below:

1. The processing fee which is required to be paid upfront.
2. Charges like mortgage registration fees, stamp duty fees, etc.
3. In case you decide to switch lenders, you will need to pay the prepayment fees.

Tips to avoid Reverse Mortgage Loan Scams

Some of the points you need to be aware to avoid Reverse Mortgage Loan scams are given below:

1. Do not sign any documents you do not understand.
2. Do not respond to any unsolicited advertisements related to reverse mortgage loan and only apply post confirming its authenticity.
3. Do not give into claims of having house ownerships with no down payments.
4. Do get in touch with a financial consultant in case of any queries.

Tax Benefits in Reverse Mortgage Loan

Individuals availing a reverse mortgage loan can enjoy tax benefits under Section 10(43) of the Income Tax Act, 1961 where the loan amount is exempted from being taxed. Loan amount received by the borrower whether in a lump-sum form or as monthly installment will be exempted from being taxed despite it being a capital gain for the senior citizen.

How to Apply for a Reverse Mortgage Loan

You can apply for a reverse mortgage loan online by visiting the website of the bank or NBFC which offers this type of loan.

You can click on the 'Apply Now' button and fill the application form followed by submission of the relevant documents.

A representative from the bank will get in touch with you and will further assist you with the application process.

If all the documents and application form submitted by you are correct during the verification process, the bank will approve your loan application.

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