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Understand Reverse Mortgage Loan and How they Work

· Reverse Mortgage

Reverse mortgage loan is a form of secured lending in exchange for a mortgaged property. But unlike ordinary mortgage loans, reverse mortgages do not require a borrower to pay EMIs. The ownership of the mortgaged property is transferred to the lender after the borrower’s demise, or the property’s heir can choose to repay the amount availed and get back the property.

 

Thus, one of the reverse mortgage benefits is that it puts zero repayment liability on a borrower.

Reverse mortgage loans are an ideal funding alternative for senior citizens and retirees aged above 60 years. The principal against the mortgaged property is estimated based on current market value of the same. 

Other factors taken into consideration are a borrower’s age, rate of interest, and profit margin decided by lenders. In a reverse mortgage loan, a borrower can continue residing in the mortgaged property.

Like a loan against property, a lender also levies processing fees and other charges on reverse mortgage lending. But all these are included while calculating the borrowing amount. But in a loan against property or LAP loan, borrower has to repay the amount availed via EMIs.

Loan against property eligibility is also different from that of a reverse mortgage. After receiving the sanctioned funds, an eligible applicant has to bear the loan against property interest rate and repay the same along with the principal amount through monthly EMIs. 

The EMIs continue throughout the loan tenor. The title deed of that property is transferred back to a borrower once the repayment is complete.

 

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