Exploring the World of Reverse Mortgage Loans in India

We had a gentleman walk into Finvest India office immediately after retirement to seek investment & returns through SWP as he did not have the right asset allocation and was invested heavily in Real estate properties, few of them not yielding any income as well.

One of the solutions we discussed was Reverse mortgage with our bankers. I thought this approach and information about Reverse mortgage could be useful to share. Please do complete research before dwelling further.

?? ?? What is a Reverse Mortgage Loan?

A Reverse Mortgage Loan is a financial product that allows homeowners, typically seniors aged 60 and above, to convert a part of their home's equity into regular income without having to sell or vacate their property. It provides additional source of income for senior citizens who have a self-acquired or self-occupied home in India. The borrower is paid payments by the lender against the mortgage.

?? How does it work in India?

1?? Eligibility: To be eligible for a reverse mortgage loan in India, you must be a homeowner with a clear and marketable title to the property.

2?? Loan Amount: The loan amount is determined based on factors like your age, the property's value, and the prevailing interest rates.

3?? Tenure: The loan can be availed as a lump sum, periodic payments, or a combination of both.

4?? Repayment: Unlike traditional loans, you don't make monthly payments. The loan is typically repaid when the homeowner passes away, sells the property, or permanently moves out.

5?? Interest: Interest accrues on the loan amount but is typically paid only at the end of the loan tenure.

?? Benefits of Reverse Mortgage Loans:

1?? Financial Security: It provides a regular income stream, ensuring a comfortable retirement.

2?? Homeownership: You can continue to live in your home.

3?? No Tax Liability: The income received is typically tax-free.

4?? Flexible Usage: You can use the funds for various purposes like medical expenses, home renovation, or travel.

?? However, it's crucial to understand the terms, conditions, and potential implications of a reverse mortgage loan before committing.

Before considering a Reverse Mortgage Loan, consult with financial advisors and do thorough research to ensure it aligns with your long-term financial goals. ??

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Reverse Mortgage Loan Eligibility Criteria

1. A reverse mortgage is available to anybody over the age of 60. In case a couple wishes to opt for one, the age of spouse should be more than 58 years.
2. The borrower must have a fully owned house. In case of a couple, at least one of them must own a house.
3. The property must have been in existence for at least 20 years.
4. Properties that are let out or being used for commercial uses are not eligible.

Documents Required To Avail Reverse Mortgage

The documents required to avail a reverse mortgage are mentioned below.

1. Proof of Identity
2. Proof of Residence or address
3. Employer Identity card
4. Property papers
5. Account statement of the last 6 months for all bank accounts held
6. Loan account statement of the last one year (if any)

Top 3 Tax Benefits On Reverse Mortgages

1. The income the borrower receives from the bank will be tax free.
2. In the event that the house is renewed or repaired with this money, the amount spent on the renewal or repair will be eligible for deduction in computation of income.
3. The repayment of the loan at the end of the loan term will not be considered deductible.

7 Points To Remember In Reverse Mortgage

1. The maximum loan provided under this scheme can go up to Rs.1 crore
2. The minimum tenure of the loan is 10 years while the maximum tenure varies from bank to bank.
3. The borrower can either opt for monthly, quarterly, yearly or lump sum payments.
4. The property must be revaluated every 5 years by the bank or housing finance company.
5. The rates on a reverse mortgage vary from bank to bank and the type of loan the borrower has opted for.
6. The processing fee of a reverse mortgage varies depending on the bank.
7. A borrower can prepay the loan at any point during the term of the loan without attracting a prepayment fee, in most cases.

Disclaimer: This article is only for information purpose and should not be treated as Financial Advice. Investments are subject to market risk; please read all scheme related documents carefully before investing. Past performances may or may not be repeated in future. Remember, financial decisions should align with your goals and risk tolerance. Consider consulting a financial advisor for personalized advice.

Finvest India

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