Regular Income with Reverse Mortgage

A reverse mortgage loan(RML) enables a senior citizen to get regular payments from a lender against the mortgage of his house.Senior citizen means a person above 60 years of age. Such a loan allows the borrower to continue to occupy his house as long as he lives,Unlikeother loans,this one need not be repaid by the borrower.

The concept is simple-a senior citizen who holds a house or property,but does not have a regular source of income,can mortgage his property with a bank and the bank pays the person a regular monthly amount.The person who ‘reverse mortgages’his property can stay in the house for his life time and continue to receive the much needed regular payments.

The bank will have the right to sell off the property after the incumbent passes away or leaves the place,to recover the loan.It passes on any extra amount to the legal heirs.The loan amount is dependent on the value of the house as assessed by the lender,age of the borrower and prevalent interest rates.

The loan can be provided through monthly ,quarterly ,half-yearly or annual disbursements ,as a lump sum,as a committed line of credit or as a combination of the three.The maximum period of a loan is 20 years.The lender has to value the property periodically-at least once in five years- and the quantum of loan may be revised based on such revaluation at the discretion of the lender.

On the borrower’s death or on the borrower leaving the house permanently,the loan is repaid along with accumulated interest ,through sale of the property .The borrower or the heirs also has the option of prepaying the loan at any time during the loan tenure or later,without any prepayment levy.The borrower or his heirs can also repay the loan with accumulated interest and have the mortgage released without resorting to sale of the property.

Many senior citizens will find reverse mortgage a solution th their financial needs after retirement.