Reverse Mortgage: A boon for senior citizens

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Reverse Mortgage provides senior citizens with supplemented income to be able to manage basic necessities and medical expenses post retirement without the need to be financially dependent on others.

Highlights:

• Great product for property rich, cash poor senior citizens
• Minimum age to avail loan is 60 years
• Repayment post passing away of the owner or selling of the property
• Loan to Value ratio is about 60%-80%
• Loan tenure is between 10-15 years
• Home maintenance remains home owners responsibility
• Property must be free from any legal claims, liability and encumbrances
• Payment received are not treated as incomes and are Tax Free

The launch of Reverse Mortgage in India was good news especially for those senior citizen who were property rich but cash poor and hardly had any additional source of income for basic necessities and other expenses.

Reverse Mortgage is a financial product that allows home owners to mortgage their property with financial institutions or Banks and receive a one-time lump sum amount or in monthly equated installments for a pre-defined period depending upon the value of the property.

Basic necessities, increasing living and medical expenses pose survival challenges for many senior citizens who survive on meagre savings or on pension post retirement. It is one bitter truth that expenses galore with age while income dwindles with time. Investments portfolios, health insurance and other savings also provide limited support post retirement. The very basis of Reverse Mortgage, as a solution, is based on simple and unavoidable realities that come with age.

The Four factor valuable option:

Reverse Mortgage is designed to provide a monthly equated installment to the home owner who is willing to mortgage his property with a financial institution or a bank providing Reverse Mortgage as a product. In few cases, home owners can also opt for lump sum amount or line of credit apart from monthly equated installments.

• Based on current home valuation and age of the home owner, the financial institution builds an equated monthly installment model that will be paid to the home owner and extended to the spouse in case of the death of the home-owner.
• The second interesting and important factor is that the owners (Home owner and spouse) continue to stay in the same house even after the end of the product maturity period of payments by the bank to the owners. The bank cannot lay claim till the spouses continue to occupy the premises.
• The third factor is that the financial institution gives the heir the first right to settle the mortgage amount, with accumulated interest, and claim ownership.
• The fourth factor ensures that the heir can claim the amount received over and above the mortgage sum post the sale of the house and receivables as fixed and informed by the institution.

Reverse Mortgage gives senior citizens a sound option to stay in their own property, receive monthly expenses and continue with their set lifestyle proudly. And the monthly receivables continue for the surviving spouse, ensuring that all needs are taken care post the death of the primary home owner.

The first Reverse Mortgage product was launched by DHFL in India and is available with leading banks like SBI, Bank of Baroda, Union bank and Axis Bank along and also with Bajaj FinServ.