Reverse Mortgage

Most of us don't think about the future and save when we are young. Neither were our parents. In those times, parents lived with their wards till their end. They don't need income during retirement. Times have changed. Relationships don't belong. Most of the children are abroad. Everyone is concerned about their career and future, and does not have quality time for their parents. Retirement life without income is very difficult.

At times like these, having a home is enough to live a happy life. Do not murmur, I am not recommending anyone to sell their house. Instead, I am asking you to live in your own home, in a familiar neighborhood and at the same time, receive money for your monthly expenses. This is definitely possible. The way out is a special type of bank loan. This type of bank loan is called reverse mortgage. Let's see more about it.

Highlights of a reverse mortgage bank loan.

1. Both spouses may reside in their home for the duration of their lives.
2. Couples should not pay any kind of money to banks. Instead, the banks continue to pay for their living costs based on their property value
3. After the lifetime of the couple, the heirs also need not pay any kind of money to the bank in this regard.
4. Money received from banks is not treated as income for tax purposes.
5. The house remains in the owner's name even during the period of receipt of payment from the bank but it will under linen to the bank 

Who can get a reverse mortgage loan from banks? 

1. The house must be in both names of the couple or in one name.
2. Generally, one of the couples should be above 60 years and the other should be above 55 years.
3. The house is in clear title without any encumbrance
4. Couples can live in that house for a long time. In the absence of one of the two, the other may continue to live in the house.
5. This loan cannot be used for rental houses or commercial property.
6. Banks do not look at the details of the borrower's income or their credit score to get a loan. Bank is more concerned about property title and its value
7. Most of the nationalized banks, including the State Bank, offer these types of loans to senior citizens. 

The practice of reverse mortgages. 

1. Bank appraisers will access the house details and arrive at the age of the house and how long it will be in good condition.
2. Loans are available at around 60% - 80% of the home's appraisal amount.
3. Bank appraisers evaluate the value of the house every five years and adjust the loan amount accordingly.
4. Loan amount means the amount available to us and the interest thereon and other expenses incurred for this loan. All together is considered as the total loan amount
5. interest rates on the loan can be 8% - 12%. It varies from bank to bank.
6. Generally, the interest rate for this type of loan is slightly higher than the interest rate for a home loan.
7. We can get money from the bank either monthly or at regular intervals as per our requirement. Apart from this, some banks also have a system of withdrawing money for medical expenses, in case of any emergency.
8. After the lifetime of both the couple, banks will sell the house on that point of time, adjust the amount due to them and the remaining amount will be disbursed to their legal heirs.
9. Even if for some reason the sale price of the house is less than the loan amount of the banks, the heirs do not need to pay the money to the banks. Banks collect the amount from insurance companies. This is a salient feature of this Reverse Mortgage loan
10. If the heirs want to keep the house themselves, they can pay all the amount due to the banks on that settlement date and keep the house with themselves.
11. When the couple wish to move to another house, or if they think that the loan is enough, or if they wish to sell the house, they can settle all the loan amount owed to the banks. Once the loan is prepaid in full, they are free to use their property as per their wish.

For example, if you borrow Rs 15,000 per month for a period of 15 years, at an interest rate of 8%-9%, the loan amount including interest will be around 50 lakhs. For this, the current value of the house should be around 70 lakhs.

This seems to be the perfect way for an elderly couple on a limited income to stay in their most familiar home for the rest of their lives in retirement.