All you need to know about reverse mortgage
Reverse mortgage is a financial option that senior citizen homeowners aged 60 and above can explore. Once all mortgages on their property have been paid off, they may borrow against the equity (or appreciation in value) of their home.
By availing of it, he would receive payment without getting displaced from his current residence. The option of selling his existing flat and moving to a different place is quite traumatic for most people – and especially for older people.
Unlike ordinary home loans (mortgages), a reverse mortgage does not require repayment as long as the borrower lives in the home. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to the homeowner or to his or her survivors.
Payments may be received in a lump sum, on a monthly basis (for a fixed term or for as long as they live in the home), or on an occasional basis as a line of credit. Currently at least, this is a product that is ideal for a consumer who is asset-rich but liquidity-poor. In fact, there is no competing product in the market.
The reverse mortgage can be used by senior homeowners (say age 65) and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home.
* Tenure: Equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
* Term: EMIs for a fixed period of months selected.
* Line of Credit: Unscheduled payments or instalments at times, and in amount of borrower's choosing until the line of credit is exhausted.
* Modified Tenure: Combination of line of credit with monthly payments for as long as the borrower remains in the home.
* Modified Term: Combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
Situation in India
We still haven’t seen many options launched here in India yet. In fact, only Punjab National Bank and Dewan Housing have launched the product and executed deals. Others like Corporation Bank and ICICI Bank are all still in the drawing board stage. SBI has postponed the launch in view of the lukewarm response so far from the end user.
DHFL was the first to launch the Saksham scheme on reverse mortgage in September 2006.
The scheme is currently targeted towards urban customers. All bankers (including a couple of foreign banks) agree that it is a very difficult product to take to the Indian market. The main worry is the social stigma attached to borrowing – an especially big issue in case of individuals aged 60 years and above. Also, a chat with a senior citizen reveals that he would use the monies from reverse mortgage for a medical emergency, but would not be comfortable using it for say a luxury like a holiday.
By ; PV Subramanyam
Via : moneycontrol.com
By availing of it, he would receive payment without getting displaced from his current residence. The option of selling his existing flat and moving to a different place is quite traumatic for most people – and especially for older people.
Unlike ordinary home loans (mortgages), a reverse mortgage does not require repayment as long as the borrower lives in the home. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to the homeowner or to his or her survivors.
Payments may be received in a lump sum, on a monthly basis (for a fixed term or for as long as they live in the home), or on an occasional basis as a line of credit. Currently at least, this is a product that is ideal for a consumer who is asset-rich but liquidity-poor. In fact, there is no competing product in the market.
The reverse mortgage can be used by senior homeowners (say age 65) and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home.
* Tenure: Equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
* Term: EMIs for a fixed period of months selected.
* Line of Credit: Unscheduled payments or instalments at times, and in amount of borrower's choosing until the line of credit is exhausted.
* Modified Tenure: Combination of line of credit with monthly payments for as long as the borrower remains in the home.
* Modified Term: Combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
Situation in India
We still haven’t seen many options launched here in India yet. In fact, only Punjab National Bank and Dewan Housing have launched the product and executed deals. Others like Corporation Bank and ICICI Bank are all still in the drawing board stage. SBI has postponed the launch in view of the lukewarm response so far from the end user.
DHFL was the first to launch the Saksham scheme on reverse mortgage in September 2006.
The scheme is currently targeted towards urban customers. All bankers (including a couple of foreign banks) agree that it is a very difficult product to take to the Indian market. The main worry is the social stigma attached to borrowing – an especially big issue in case of individuals aged 60 years and above. Also, a chat with a senior citizen reveals that he would use the monies from reverse mortgage for a medical emergency, but would not be comfortable using it for say a luxury like a holiday.
By ; PV Subramanyam
Via : moneycontrol.com
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