Reverse Mortgage Loan Scheme – A blessing for senior citizens

Goa has large number of senior citizens due to healthy relaxed lifestyle, clean environment, better health care consciousness and general increase in life expectancy. Most of these elders prefer to live in their own homes, independent of their children. However many of them, though may have large mansions may not have adequate income to maintain decent lifestyle due to high cost of living, rising cost of medical care, reduction in income with falling interest rates and inflation or may not have financial support of children. Gone are the days when the elderly lived with their sons and daughters, depending on them for their amenities and medical needs.

In such financially difficult situation, reverse mortgage scheme introduced by the Government of Indiain 2007can give them a life of comfort and dignity without requiring them to be dependent on the relatives or live in senior citizens homes or orphanages.

Reverse mortgage is the opposite of conventional home loan. Reverse mortgage is a loan available to senior citizens against mortgage of their residential premises without requiring to pay loan during their lifetime and at the same time can live in the same own house until death of the borrower and his spouse. He has option of monthly, quarterly, annual or lump sum loan payment.This is one of the way to meet the financial needs if you do not have adequate income in old age. The borrower can free the property in midterm if funds are available by paying the loan at no prepayment penalty or charges. If both die, the bank will give their heirs two options either to settle the overall outstanding loans and retain the house or bank will sell the house, use the proceeds to settle the outstanding loans and give the balance to the heirs. If the sales proceeds are lower than the accrued principal and interest, amount the loss is borne by the bank. The main features of this loan are as under.

Any house owner with clear title, over 60 years of age is eligible for a reverse mortgage loan.

The maximum loan is upto 90% of the value of the residential property. Borrower has the option of increasing the quantum of loan periodically if the value of the property goes up. The interest rate is determined by the prevailing market interest rates which could be floating or fixed.

The maximum period of property mortgage is 15 to 20 years ie any senior citizen opting for reverse mortgage will get annuity from bank for 15 to 20 years. After that period, the annuity payments tops, however the borrower and the spouse can continue to live in the mortgage house till death.

The borrower can opt for a monthly, quarterly tenure or lump-sum payment of eligible loan.

The amount received against reverse mortgage does not attract any tax liability as mortgage is not a transfer. The major reverse mortgage lenders in India are National Housing Bank, Diwan Housing Finance ltd, Indian Bank, Central Bank of India, State Bank of India, Punjab National Bank, Bank Of Baroda, Corporation Bank, Canara Bank. 

Reverse mortgage is a relatively new concept in India and has not gained much popularity in India as in western world due to inadequate marketing of the product,  as a result many of the senior citizens are not aware of the existence of such schemes.

Reverse mortgage is an ideal option for senior citizens who require regular income in his years ahead to live a quality life if one’s pension or income to live is inadequate.