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Home Business Finance & Insurance

A Guide to Understanding Reverse Mortgage Loan Schemes

Lillian Russell by Lillian Russell
June 9, 2021
in Finance & Insurance
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Retired life can often be financially challenging, owing to the rising cost of living these days. In India, it is commonly noted that retirees possess assets but are low on funds. Without a regular source of income, keeping up with expenses can get challenging.

A Guide to Understanding Reverse Mortgage Loan Schemes

This is why reputed financial institutions bring dedicated loan plans for senior citizens and retirees; one such solution is a reverse mortgage loan.

A reverse mortgage is when a senior citizen borrows funds against a self-occupied property without immediate repayment liabilities. In such loans, the amount gets repaid by default once the borrowers stop residing in that property further or when they pass away. Eventually, the ownership of that property passes to the concerned lender.

Eligibility criteria for reverse mortgage loan schemes

The criteria to avail the benefits of a reverse mortgage loan vary from one lender to another. But in general, they are simple and easy to satisfy. These typically include:

  • The applicant should be 60 years of age or older
  • The property to be mortgaged to avail a loan against property must not have any litigation or liability cases
  • The property must be the applicant’s permanent residence
  • The property must be at least 20 years old

Reverse mortgage loans can also be availed jointly. In this case, if one of the co-applicants passes away, the other applicant can continue residing in the property.

Applicants can also see how a loan against property is processed to understand the entire procedure and formalities required while availing a reverse mortgage loan.

Benefits of availing a reverse mortgage loan

A reverse mortgage or property loan makes way for financial stability, which is usually a concern in old age. But such loans come with several other benefits, some of which are listed below:

  1. Helps address an urgent financial crisis: Since there is no monthly repayment required, funds received through reverse mortgage loan improve instant credit availability.
  2. The flexibility of using loan amount: Beneficiaries can use these funds to meet any number of financial requirements. A loan against property, or LAP loan, also has no end-use restrictions, which is one of the crucial things you must know about a loan against property.
  3. Low or zero risks of defaulting: Since there is no monetary repayment liability attached to these loans, borrowers enjoy zero defaulting risks on them. They only need to pay the property tax and insurance charges on time.

These are some of the most notable reverse mortgage benefits. But if you satisfy the eligibility requirements for a reverse mortgage, you can avail an ordinary loan on property or LAP. Loan against property, too, is a mortgage loan type, but unlike a reverse mortgage, a LAP has to be repaid in the form of EMIs.

The EMI amount depends on the loan against property interest rate levied by the lending company. In a LAP, although the property ownership does not shift to the lender, the title deed is transferred. It is restored to the borrower once the loan is entirely repaid.

Loan against property eligibility is also simple, considering the collateral minimizes risk for the lender. The borrowable sum depends on the applicant’s eligibility. An applicant can draw up to 75 to 90% of his/her property’s market value as LAP. Thus, apart from an applicant’s eligibility, the current market value of the property also determines the borrowable principal of LAP.

Borrowers also get to make their loan application simpler with pre-approved offers extended by lenders. You only need to mention your name and mobile number to check your pre-approved offer online.

Eligible applicants can tally LAP with reverse mortgage loan schemes to find a more convenient option for their financial requirements. It is also a good idea to compare the interest rates charged by different financial institutions before applying for the loan.

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Lillian Russell

Lillian Russell

Lillian Russell is a marvellous and widely read author online. She has won several awards for her unique take on writing and reporting, over the past couple of decades. Lillian boasts over two decades worth of writing experience. During this time, she has published numerous blogs, books and articles on a wide variety of subjects.

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