Know about the Reverse Mortgage
Reverse mortgage is ideal for someone who is 70 years and above, living in a property worth at least Rs 30 lakh (Rs 3 million)and above. For senior citizens less than 70 years of age, the loan amount will not be attractive enough to justify mortgaging their property. The older a borrower, the larger the percentage of the home’s value that can be borrowed.
The hallmarks of a good reverse mortgage product are flexibility, availability and simplicity of use. It should also give an easy exit clause and be subject to the banking Ombudsman’s jurisdiction.
As a consumer you should be aware of the eligibility : the property should not be more than 20 years old for availing reverse mortgage. It is better to avail of a joint liability scheme, though the amounts will be lower. Valuation for the property is done by the lending institution and is the basis for payment. This may differ from the perceived value of the property.
What should you be aware of as a consumer? You ought to look at the systems of the bank and its capability to handle this product, which will be a little complex to start with.
There are no asset or income limitations on borrowers receiving reverse mortgages. The only condition is that this money should not be invested in a business.
The company assesses the value of the property and lends about 30 per cent of the value to a customer in the age group of 60 years and about 60 per cent to those of 80 years and above.
Options
One option that some senior citizens could consider is going to quality retirement homes, and selling/ renting their property asset. However this also involves going to a new place and creating a new infrastructure for yourself – from a grocer, a maid, a cook, a doctor, a bank, a CA to filing your IT returns. Many people find this intimidating.
These products are still evolving. But it helps that the central government is keen on this, and that we have more than 30 years’ experience of the developed nations to guide us.