• Reverse Mortgage Loan

    Reverse mortgage loans are a unique type of home loan designed for senior citizens and require no monthly mortgage payments. The loan payments need not be made until the borrower passes away, sells or moves out of the house. There are no restrictions on the end use of the funds obtained via a reverse mortgage loan.

    It is called reverse mortgage because the lender is making payments to the borrower. The loan needn’t be paid back till the home is sold or vacated. The borrower must however pay the property taxes, insurance and other dues.

    Reverse mortgage comes in handy when you have a financial crisis and no source of income to fund your financial needs, but you have a house and you can use that house to mortgage and avail loan.

    Home is pledged and the monetary value of the house is decided based on the demand for the house, current property prices and the condition of the house. The loan amount is then disbursed to the borrower in the form of periodic payment. The borrower can choose the frequency of the periodic payment. This is an ideal option for senior citizens so that they get regular income.

    Features of Reverse Mortgage Loan

    Eligibility

    • Individuals owning residential house or flat and who is a resident of India and above the ages of 60 can avail this loan.
    • The residential house must be in his name or jointly with his spouse.
    • If the loan is in joint account then one of the spouses must be 60 years and above and the other must be at least 58 years.
    • The age of the mortgaged property should not be more than 20 years old.
    • In case the individual has availed a home loan against the concerned property, then it is mandatory to avail an NOC. The property must be free from any impediment or burden.

    Margin

    20% margin has to be maintained.

    Maximum loan amount

    The maximum loan amount is Rs.1 crore along with interest.

    Loan tenure

    Maximum tenure allowed is 20 years.

    Processing charges

    Amount equivalent to half month’s loan instalment is charged as a processing fee. The processing fee charged may vary from bank to bank.

    Repayment

    The legal heir of the borrower, after the borrower’s death will have the chance to settle the loan along with the interest without having to sell the property. The loan is due and is to be paid in 6 months after the death of the last surviving spouse.

    The borrower can also pay the loan at any time during the loan tenure, if he wishes to and has enough funds to pay for it.

    Prepayment charges

    If the loan is transferred to another lender, usually a 2% fee is charged.

    Insurance

    The borrower has to cover all the home insurance premiums.

    Interest Rate

    Interest rate will differ from bank to bank.

    Document required 

    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: 

    • Identity proof such as voter id, PAN, Aadhaar, passport, etc. 
    • Address proof such as utility bills, Aadhaar, Passport, etc. 
    • Proof regarding the ownership of the property. You can submit documents like the property tax receipts, utility bills, title deed, etc. 
    • Last 6 month’s bank account statement.  
    • If you have availed any loan from any lender, then the account statement for the last 12 months. 
    • Passport size photographs. 
    • 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. 
    • Income documents such as copy of form 16, ITR returns for the last two years or salary slip for the last three months. 
    • Qualification certificate in case you are a CA, Doctor, Lawyer, Architect, etc. 
    • NOC in case you have availed a loan on the property. 
    • Occupancy certificate in case of ready to move in property. 
    • Relevant property papers such as development agreement of the builder, conveyance deed in case the property is new, approved plan copy, etc. 
    • It is mandatory for Property owners in Maharashtra to submit the registered agreements for share and sale certificates. 

    Tax Benefits

    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. 

    FAQs

    1. Can I apply for a reverse mortgage loan offline? 

      Yes, you can visit the nearest branch of the lender offering reverse mortgage loan along with all the relevant documents. A representative from the lending company will assist you with the application process. 

    2. Should I have a good credit score if I want to apply for a reverse mortgage loan? 

      Since, this a secured loan product, your credit score doesn’t matter as long as you have a property in your name which you can pledge to the bank. 

    3. What is the monthly payment I shall receive on availing a reverse mortgage loan? 

      Generally, lenders prefer to cap maximum monthly payments at Rs.50,000. However, this amount can vary from lender to lender. 

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