After retirement to an old aged, there is sudden arise of emergencies, medical expenses that will be tough to meet regular or daily expenses in one’s life. So a lot of old aged people will get dependant on their Families. If you have your property, you can utilize it properly by getting a reverse mortgage, where the bank will pay you monthly some amount depending on the actual value of your House or Estate.
A reverse mortgage provides an additional source of income for senior citizens of India or is approaching retirement who have their property or home. A homeowner aging 62 and more and has considerable house ownership can borrow against the value of their house and can receive endowments every month, half-yearly basis, or as a lump sum.
What is Reverse Mortgage?
A reverse mortgage is a kind of loan that allows aged homeowners to convert some portion of their home equity to cash. It is beneficial for personages who do not have sufficient income or for those people who want to strengthen their retirement funds. A Homeowner doesn’t require to make any loan payments to get Reverse Mortgage.
Let’s consider an example, wherein a Mortgage Home loan, you take a loan from a bank to buy a new property where that property’s ownership will be in favor of a bank until you repay the whole loan amount to the bank in the form of EMI. A reverse mortgage is opposite to Mortgage Home Loan. If you are an old aged, where you have a property and are unable to meet your daily expenses, in this case, you can reverse mortgage your Home and transfer Homeownership to a bank. In return, the bank will pay you in the form of a monthly payment, quarterly payment, or in Lump sum depends upon the payment option you choose. The Homeowner pays the interests on the proceeds received from the bank.
How does it work?
In Reverse Mortgage, the bank pays the money to the Homeowner, instead of Homeowner making the payments to the bank. Here, the home is the collateral for this type of mortgage.
At the time of the death of the Homeowner or borrower, the legal heir will have an option to keep the home by paying off loans with interest to the bank. The bank will transfer the property documents in the name of the Legal Heir. If the legal heir is not able to buy that property, then the bank will sell the property (worth 2Crores) in the market. If the bank’s due is 1.5Crores, the Property worth is 2Crores, then the remaining excess amount that is 50Lakhs will get transferred to the Legal heirs.
That is how mainly the concept of Reverse Mortgage works. It seems like it is the income to Homeowners, but the reverse Mortgage is Taxable.
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