Reverse Mortgage

how to-get-benefit-from-reverse-mortgage

What is the reverse mortgage scheme?

This scheme is exact ‘reverse’ of plain home loan scheme. In case of a home loan one takes a lump sum loan and repays it in instalments in future. Under the reverse mortgage scheme, you get instalments and the loan is repayable in lump sum in future.

Here, the payment stream comes to the borrower for a fixed period of time in the form of monthly, quarterly or yearly payments. 

What is Reverse Mortgage ?

Reverse Mortgage is the exact opposite of a Home Loan. Anyone, who has a fully owned House can get a loan. The way, this works, is that his loan money will be divided in chunks (EMI’s) over many years and given to him every month. This can easily act as Monthly income. At the end of the loan tenure, the Bank stops paying the monthly income. If one of the spouses dies, the other can still continue living in the house. If both die, the bank gives their heirs two options – settle the overall outstanding loan and retain the house or, the bank will sell the house, use the proceeds to settle the outstanding loan and give the rest to the heirs. For people who don’t know – “Mortgage” means “Loan” 

A reverse mortgage loan becomes due when the last surviving borrower dies, or if the borrower chooses to sell the house. The bank first gives an option to the next of kin to settle the loan along with accumulated interest, without sale of property. If the next of kin is unable to settle the loan, the bank then opts to recover the same from the sale proceeds of the property.

Any extra amount, after settlement of the loan with accrued interest and expenses, through the sale of the property, will be passed on to the legal heirs. If the sale proceeds are lower than the accrued principal plus interest amount, the loss is borne by the bank. 

OR

Loan tenure is the period during which the owner of the house will continue to receive the periodic payments. However in case the borrower outlives the tenure of the loan, the payment stream shall stop but he can still continue to stay in the house.

Even after his death, his spouse can also continue to stay in the same house without having to worry about repayment of the loan. 

The reverse mortgage is a type of Home loan of older age people.

The reverse mortgage gives the right to the consumer to dive into the equity or value of the house, a loan in installments until they die, sell or move outside the house.

In reverse to reverse mortgage, the amount received in installments according to the fair value of house till the owner dies, and the Loan amount needs to the repay by the second owner of the house, or the bank will sell the house and pay the amount to the second holder after deducting the principal amount along with interest.

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