What is Reverse Mortgage?
Tenure: This is the period or term during which the borrower holds reverse mortgage loan. This period can vary between 10 and 15 years depending on the type of bank. If both or one of the applicants survive then after this period they can continue to live in the house but then no further loan will be provided. The reverse mortgaged property will be sold at higher value depending on the market after the death of applicants. The borrowers may also choose to leave the residence permanently. If this happens before the tenure term then the property will be sold to get back the borrowed loan amount. Excess amount earned on property sale will be handed to legal heir of the property.
Interest rate: Interest rates on reverse mortgage loans in India vary from 12-15%. State Bank of India has a loan scheme that has a fixed interest rate of 12.75%.
- State bank of India
- Bank of Baroda
- Dewan housing finance limited
- Punjab national bank
- Although reverse mortgage loan can act as a source of survival during old age it can always be called a last resort. It has few demerits which have to be noted before planning for a reverse mortgage loan.
- Pledge the property to loan lender means officially giving loan provider the right to sell the house to recover the loan. If the owner of a house is willing to transfer the ownership to someone after his/her death then this loan is not to be considered as a source of income.
- High rate of interest compared to other loans.
- Variation in interest rates and loan amount during the time of valuation can turn into serious problems at times.