With increasing longevity, the number of senior citizens is growing in India. While dependency in old age is incremental, the cost of health care facilities is spiraling, there is a felt need for senior citizens to be supplemented with regular cash flow stream for meeting increased living cost.
25 banks and HFCs ..!
For most senior citizens, their house is the largest component of their wealth. Pursuant to announcement, NHB (National Housing Bank) formulated Guidelines to introduce the RML (Reverse Mortgage Loan) product in India through Banks and HFCs (Housing Finance Companies). The product is now being implemented by about 25 banks and HFCs across India.
NHB in association with SUD Life (Star Union Daichi Life Insurance Company Ltd.,) and CBI (Central Bank of India), has now conceived an extension of the RML value chain to ensure life-time annuity payments to the senior citizens, a significant improvement over the initial RML product variant which limited the loan disbursement tenure to a fixed term of 20 years causing considerable inconvenience to the borrowers.
This will now facilitate the Senior Citizen borrowers to receive assured life-time payments i.e. even after completion of the fixed term of 20 years, with increased quantum of annuity as compared with earlier product variant.
In a reverse mortgage product, legal heirs of the reverse mortgage holder are given the option to pay off the loan and take ownership of property.
However, if legal heirs don't intend to pay the outstanding mortgage amount, the property is sold off and the proceeds are used to recover the loan and the rest is passed on to legal heirs and family members.
Insurance Element..!
In case there is an insurance element in a reverse mortgage, the final payment is settled as per premiums/annuities paid on the product. Predominantly, banks provide reverse mortgage products. Sametime Star Union Dai-ichi Life Insurance is the only life insurance company that had launched a reverse mortgage product. The product was also formulated by NHB that is being backed by loans from Central Bank of India and Union Bank of India. The insurer has managed to about Rs. 36 crore premium money and has sold about 100 reverse mortgage policies since it launched the product.
The housing finance arm of LIC, LIC HFL (LIC Housing Finance Ltd) already has a reverse mortgage product. Reverse mortgage products from insurers have an insurance component and provides regular payment throughout policyholder’s life by mortgaging his/her house with the bank with whom the insurer has a tie-up. Sametime, products didtributes by banks generally pay monthly cash with cut off limit for 15-20-25 years. The quantum of monthly payment (annuity) paid by an insurance company is also significantly higher.
Loan Amout..!
The loan amout depends on factors like market value of the house, borrower’s age and interest rates. However, the bank that is disbursing the loan has the final right to decide on the loan amount. For life insurance company products also, banks provide a loan on which insurer pays annuities to the policyholder.
At present, nearly dozen banks and 4 HFC's (Housing Finance Companies) are distributes reverse mortgage products.
These products particularly suit people who are above 60 years old, living alone and do not have any alternate source of income.
Reverse mortgage products are witnessing growth in the southern, western and parts of northern India. Although, people are still a little reluctant to mortgage their property in small towns, people in big cities, especially, senior citizens are looking forward to a product that assures them a steady source of funds.
Eligible Borrowers:
* Should be Senior Citizen of India above 60 years and spouse provided that he/she is above 55 years
* Married couples will be eligible as joint borrowers for financial assistance. In such cases, age criteria for couple would be at the discretion of the PLI (Primary Lending Institution), subject to at least one of them being above 60 years of age and other not below 55 years of age. In such cases, the owner of the house property shall be regarded as primary borrower and his/her spouse shall be the second borrower. In case of joint ownerships, the joint owners shall have the option to decide their status as primary or second borrower.
* Should be owner of a self- acquired, self occupied residential property (house or flat) located in India, with clear and transferable title. The property should be free from any encumbrances.
* The residual life of the property should be minimum 20 years.
Determination of Eligible Amount of Loan :
Age of Borrower : Between 60 and 70 - 60% of property value.Between 70 and 80 - 70% of property value.
80 and above - 75% of property value.
Nature of Payment:
1. Periodic: Monthly, Quarterly, Half-yearly or Annual) as desired by borrower.
2. Lump-sum
3. Line of Credit.
4. Borrower may opt for any combination of the above, subject to terms of PLI.
Servicing Fees : Maximum 1.50% per year ( of Principal outstanding)
Whether taxable : Yes. In hands of RML enabled Annuity recipients
Source: RBI
25 banks and HFCs ..!
For most senior citizens, their house is the largest component of their wealth. Pursuant to announcement, NHB (National Housing Bank) formulated Guidelines to introduce the RML (Reverse Mortgage Loan) product in India through Banks and HFCs (Housing Finance Companies). The product is now being implemented by about 25 banks and HFCs across India.
NHB in association with SUD Life (Star Union Daichi Life Insurance Company Ltd.,) and CBI (Central Bank of India), has now conceived an extension of the RML value chain to ensure life-time annuity payments to the senior citizens, a significant improvement over the initial RML product variant which limited the loan disbursement tenure to a fixed term of 20 years causing considerable inconvenience to the borrowers.
This will now facilitate the Senior Citizen borrowers to receive assured life-time payments i.e. even after completion of the fixed term of 20 years, with increased quantum of annuity as compared with earlier product variant.
In a reverse mortgage product, legal heirs of the reverse mortgage holder are given the option to pay off the loan and take ownership of property.
However, if legal heirs don't intend to pay the outstanding mortgage amount, the property is sold off and the proceeds are used to recover the loan and the rest is passed on to legal heirs and family members.
Insurance Element..!
In case there is an insurance element in a reverse mortgage, the final payment is settled as per premiums/annuities paid on the product. Predominantly, banks provide reverse mortgage products. Sametime Star Union Dai-ichi Life Insurance is the only life insurance company that had launched a reverse mortgage product. The product was also formulated by NHB that is being backed by loans from Central Bank of India and Union Bank of India. The insurer has managed to about Rs. 36 crore premium money and has sold about 100 reverse mortgage policies since it launched the product.
The housing finance arm of LIC, LIC HFL (LIC Housing Finance Ltd) already has a reverse mortgage product. Reverse mortgage products from insurers have an insurance component and provides regular payment throughout policyholder’s life by mortgaging his/her house with the bank with whom the insurer has a tie-up. Sametime, products didtributes by banks generally pay monthly cash with cut off limit for 15-20-25 years. The quantum of monthly payment (annuity) paid by an insurance company is also significantly higher.
Loan Amout..!
The loan amout depends on factors like market value of the house, borrower’s age and interest rates. However, the bank that is disbursing the loan has the final right to decide on the loan amount. For life insurance company products also, banks provide a loan on which insurer pays annuities to the policyholder.
At present, nearly dozen banks and 4 HFC's (Housing Finance Companies) are distributes reverse mortgage products.
These products particularly suit people who are above 60 years old, living alone and do not have any alternate source of income.
Reverse mortgage products are witnessing growth in the southern, western and parts of northern India. Although, people are still a little reluctant to mortgage their property in small towns, people in big cities, especially, senior citizens are looking forward to a product that assures them a steady source of funds.
Eligible Borrowers:
* Should be Senior Citizen of India above 60 years and spouse provided that he/she is above 55 years
* Married couples will be eligible as joint borrowers for financial assistance. In such cases, age criteria for couple would be at the discretion of the PLI (Primary Lending Institution), subject to at least one of them being above 60 years of age and other not below 55 years of age. In such cases, the owner of the house property shall be regarded as primary borrower and his/her spouse shall be the second borrower. In case of joint ownerships, the joint owners shall have the option to decide their status as primary or second borrower.
* Should be owner of a self- acquired, self occupied residential property (house or flat) located in India, with clear and transferable title. The property should be free from any encumbrances.
* The residual life of the property should be minimum 20 years.
Determination of Eligible Amount of Loan :
Age of Borrower : Between 60 and 70 - 60% of property value.Between 70 and 80 - 70% of property value.
80 and above - 75% of property value.
Nature of Payment:
1. Periodic: Monthly, Quarterly, Half-yearly or Annual) as desired by borrower.
2. Lump-sum
3. Line of Credit.
4. Borrower may opt for any combination of the above, subject to terms of PLI.
Servicing Fees : Maximum 1.50% per year ( of Principal outstanding)
Whether taxable : Yes. In hands of RML enabled Annuity recipients
Source: RBI
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