A reverse mortgage loan is a unique financing option for senior citizens, which enables them to become financially independent. In this case, borrowers utilise the equity of their home to avail payments from a lending institution.
The principal amount provided to an individual under this facility is calculated based on certain factors which include – a concerned property’s current market value, borrower’s age along with the interest rate and margin charged by a selected lender. The loan amount can be availed as a lump sum or periodically according to the convenience of the borrower.
Some other benefits of a reverse mortgage loan include –
With a reverse mortgage loan, borrowers do not need to make monthly payments towards the loan liability. Furthermore, in case of a joint application by a married couple, either of the spouses can stay on the property throughout their lifetime.
Since any payout received by a senior citizen is not considered to be an income under section 10 of the Income Tax Act, reverse mortgage funding is also not taxable.
Reverse mortgage loans come with no end-use restriction, and therefore, can be used for a host of financial needs.
However, borrowers need to meet specific eligibility parameters before applying for reverse mortgage financing. They include the following –
Applicants must be a citizen of India above 60 years of age. In the case of a joint application, one of the spouses must be at least 55 years of age.
The property must carry a residual life of a minimum of 20 years as well as serve as the applicant’s primary residence.
The house must be self-occupied by the applicant. Rented properties will not be considered eligible for the advance as the part of reverse mortgage benefits.
Other than this, individuals who require immediate funding can also consider opting for alternative options like a loan against property which also come with attractive interest rates.