Reverse mortgage, a type of scheme designed to benefit senior citizens in their retired life, has been in India for just around a decade. These loans offer a specific sum of money to the borrower periodically.
The line of credit is secured against a property. Along with regular cash assistance, a major advantage of such a scheme is that borrowers need not worry about repayment.
This loan is especially helpful for senior citizens with high-value properties, who do not have access to ample cash. Very unique and different from mortgage loans, the following facts of such schemes must be noted by potential borrowers before applying for it.
A scheme meant for senior citizens, at least one of the two spouses must be a senior citizen to be applicable for such a loan.
Usually, a maximum of 60% of the property value is offered as loan amount, which generally goes up to Rs.50 lakh although there have been exceptions across the country.
The minimum tenor is commonly fixed at 10 years.
Generally, 4 types of payment options are available. Borrowers can choose from monthly, quarterly, half-yearly or annual payments.
Usually, financial institutions evaluate the property every 5 years.
Under usual circumstances, borrowers have the option to prepay their loan at any time of their convenience.
Senior citizens should carefully consider the different aspects of a reverse mortgage loan before applying for it. Lump-sum repayment of such loans can especially be a problem and consequently, borrowers can also consider opting for a loan against property, which also do not have any end-use restrictions.