WALKING STICK FOR SENIOR CITIZEN- THE REVERSE MORTGAGE
We all know that a distinctive kind of loan available to the senior citizens is known as the reverse mortgage. The best part is that does need any kind of monthly payments. During the death of policyholder, loan is repaid and interestingly, also known as the home equity conversion mortgage (HECM).Interestingly, if you look at the home loans, you take a lump sum amount and pay it in instalments. However, under the reverse mortgage scheme, one gets instalments and the loans are paid in the future.
For Example: Mr and Mrs Menon have reached 62 years and his wife is 60 years old and lives in Kochi, which is costing INR 1 Crores. They have two sons. Since both are unemployed, Mr and Mrs. Menon go in for reverse mortgage. Bank will offer them loans up till INR 60 Lakhs, meaning they will be paid approx INR 35,000 per month for the next 20 years.
After 20 years, Children support the family. If Mr.Menon and Mrs.Menon passed away early, Loan need to be cleared. Now the son and daughter do not have money to pay for the bank. Bank decides to sell the asset, and at this stage price is INR 3 Crores. Bank will take INR 1.1 Crores and remaining is offered to the sons of Mr and Mrs. Menon. The outstanding loan becomes INR 1.1 Crore, it was INR 60 lakhs at end of 15 years.
Features of Reverse Mortgages:
- This loan is ideal for person (Single Person) crossing 60 years of age.
- The major aspect of reverse mortgage is that, it is considered as a last resort of income.
- Furthermore, for the couple one of the members should have completed 60 years.
- Property must be yours and one cannot get the loan on inherited property/property received as a gift.
Documents for Taking Reverse Mortgages:
- Xerox of PAN Card
- List of legal heirs
- Proof of Ownership
- Copy of registered will
Feature that Influence Reverse Mortgages:
Some of the features influencing reverse mortgages are given below as follows:
- Age of the applicant
- Interest rates
- Single Person/Couples
- Value of Asset
Tenure of Reverse Mortgages:
To be honest with you, the duration of these loans shall not be more than 20 years.
Rate of Interest: The rate of interest of the reverse mortgages will always change, depending upon market situations.
Advantages of Reverse Mortgages:
Some of the advantages of re verse mortgages are as follows:
- You do not get any monthly payment during the loan tenure.
- Income from reverse mortgages is not taxable.
- Interest rates are said to be very adjustable.
- Borrower can choose for monthly, quarterly and annual form of payments
- Can be used to eliminate existing mortgage and improve your monthly cash flow.
- Money can be used for purposes like house repairs, maintenance, medical issues, and clearing the debts.
Disadvantages of Reverse Mortgages:
The major disadvantages of the reverse mortgages are given below as follows:
- If the policyholder passes away, loans must be paid before the title can be transferred.
- Reverse mortgages have various rates, and is influenced by market situations.
- Fees and closing expenses will always be very higher.
- You must pay property taxes and house owners insurance.
So, one can say that reverse mortgage as owner’s age increases, the amount that can be borrowed also increases.
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