Senior citizens can opt for a reverse mortgage to meet their basic financial requirements by utilising the value of their property as a mortgage. This is a financial tool which helps individuals beyond the age of employment avail financial assistance. Instead of paying EMIs on an amount availed as a lump sum, the transaction is reversed in the mortgage loan where the lender pays the borrower a monthly remuneration.
However, a reverse mortgage loan is available only for -
- Individuals with a minimum age of 60 years.
- Properties more than 20 years old with permanent ownership of the loan applicant.
If you are about to avail this financial product, make a note of these pointers first.
- Passing property to an heir- In case of demise of a borrower, the reverse mortgage scheme lender is liable to claim ownership of the property. The lender will provide legal heirs with an option to repay the loan, failing which the property will be ceased.
This is arguably the most important pointer to consider before availing reverse mortgage loan. You can instead avail a loan against property to utilise your property’s value.
- Occupancy of property- If the property remains unoccupied for more than a year, lenders may ask borrowers to foreclose the loan. Make sure you apply for a reverse mortgage India only when you are sure to reside in the property for a prolonged period.
- Property tax & home insurance payments- To avoid foreclosure, one should pay property tax regularly. Besides, purchasing a home insurance policy is mandatory to avail reverse mortgage benefits. Not meeting the insurance policy payments can trigger the reverse mortgage repayment clause.
This financing option is tailor-made for senior citizens who are obviously beyond the age of income generation. For a simpler financing solution, consider a loan against property and utilise the funds in investment options to generate returns.