Reverse mortgage is a
finance option for senior citizens. It acts as an additional source of income
if the existing pension corpus is inadequate to fund their retirement. This
option allows the senior citizens to mortgage a self-owned property with the bank.
In turn,the bank
provides cash flow for a fixed tenure. At the end of the term, the property is
sold by the lender to recover the loan.
Eligibility...
This scheme is
available only if the property owner is more than 60 years old. If the loan
applicants are a married couple, one of the applicants should satisfy the age
criterion. The home should not have a loan at the time of applying for the
mortgage.
Loan..
The loan can be
disbursed as regular, fixed monthly payment for a maximum of 20 years, as a
lump sum in a few tranches up to 50 % of the loan amount, or as annuity for the
residual life of the borrower.
Repayment..
The loan is recovered
only on the death of both the spouses in case of joint borrowers.No repayment
is required during the lifetime of the borrower/s.The loan,along with the
accumulated interest,can be repaid by the legal heirs or settled by selling the
property.
Taxation..
The amount received
by the borrowers under reverse mortgage scheme is exempt from tax under Section
10(43) of the Income Tax Act.
Points to note..
The bank may charge a
nominal fee for processing the loan. The reverse mortgage loan can be prepaid
at any time during the currency of the loan. On clearance of all dues, the
title deed has to be returned by the lender.
Src: ET
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