Reverse mortgage: A Boon for senior citizens

Any senior citizen of 60 years and above, staying in self-acquired house/flat either singly /or jointly with the spouse, is eligible for loan under Reverse Mortgage Loan Scheme from Banks or Housing

Finance Corporations: The applicant can opt for a monthly scheme of income or a lump sum or as a combination of both. It aims at partially meeting the financial needs of senior citizens, who are otherwise not eligible for any kind of financial assistance under conventional bank loan schemes. The amount of loan is determined based on the valuation of the house/flat and the tenure of loan is 15 years extendable by another 5 years. Even if the senior citizen passes away, the spouse can continue to occupy the property until his/her demise.

The spouse is usually made the co-borrower. The Bank will thereafter put the property to auction after giving due intimation to the legal heirs who will have preference to repay the loan and get the property released. The borrower(s) or his/her heirs have the option to prepay the loan at any time during the tenure of the loan or later without any prepayment charges. There is no need to service the loan and therefore, borrower does not make any monthly repayments of principal and interest to the lender.  

Since this scheme envisages a loan tenure of maximum 20 years only, National Housing Bank (NHB) has recently issued new guidelines to all Banks. Under these     new       guidelines, the loan amount will be placed with any insurance company of their choice and the company will pay annuity to the borrower monthly throughout his life and thereafter to the spouse. This new scheme is called “Reverse Mortgage Loan enabled Annuity” (RMLeA). Central Bank Of India is the first Bank to launch this new scheme in collaboration with Star Union Dai-ich Life Insurance Co. Ltd. with a lower rate of interest at 9.5%. There are two options, one with return of purchase price and the other without return of purchase price. Other Banks also are in the process of finalizing the new guidelines.

REVERSE MORTGAGE LOAN SCHEME is a boon to those senior citizens, who own house property but do not have sufficient regular income. As the age advances, medical needs increase. It is also generally observed that children either cannot afford or deliberately avoid responsibility. Under such helpless conditions, this scheme enables the senior citizens to stay honorably   in their own house till their death without resorting to selling the property to stay in a small house or old age home in the twilight of their life.

By: Mr.Ramesh Bukkapatnam, Counselor, Reverse Mortgage Loan Scheme.

Help Age India, 2-2-3/A/A5, Premasai Apts., Beside A.T.I.,Shivam Road, Hyderabad-500007(AP)

PH: 040-27427066(O), 9849119798(M).

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