Among the many well thought out schemes that have been made available by the Government of India specifically for Senior Citizens is the Reverse Mortgage Loan. This is a fantastic scheme that allows senior citizens to monetize their property without having to sell it. Despite its usefulness, most people are not aware of its existence. Given below are the details of the Reverse Mortgage Loan scheme extracted from http://www.india.gov.in site.
A large part of the savings of Senior Citizens is tied up in non-liquid assets such as homes and property. Senior Citizens usually do not have a regular income and if they exhaust their savings, then it gets difficult to meet living expenses without having to sell their house. A reverse mortgage allows a senior citizen who owns a house to avail of a monthly stream of income against mortgage of the house. The senior citizen remains the owner and occupies the house throughout his or her lifetime, without repayment or servicing of the loan. This system allows Senior Citizens to convert their homes into cash without having to sell their property.
The monthly amount paid by the reverse mortgage company can be used to meet medical expenses, pay utility bills and so on. The borrower does not need to repay the loan as long as he/she continues to live in the house. They can never owe more than the value of their house. After the death of the Senior Citizen, the lending institution sells the house to recover the amount of the mortgage plus interest. All amounts in excess are given to the heirs of the borrower. The basic difference between a reverse mortgage and a regular mortgage is the fact that a reverse mortgage has no predetermined tenure and does not have to be paid back in monthly installments. This makes is extremely viable for Senior Citizens.
The amount a Senior Citizen may receive per month is determined according to the value of their property, their age and the prevalent interest rate. Generally, people who have a more valuable home and are older get a larger amount of money per month. The National Housing Bank (NHB), which regulates housing finance, has enumerated operational guidelines through which this facility will be extended by Primary Lending Institutions (PLIs). PLIs include Scheduled Banks and Housing Finance Companies (HFCs) registered with the NHB.
Some reverse mortgage schemes offered by Primary Lending Institutions in India are the:
- Baghban Scheme from Punjab National Bank
- Saksham Scheme from Dewan Housing Finance Corporation Limited
Institutions such as ICICI Bank, Bank of Baroda, Oriental Bank of Commerce and Andhra Bank have also planned to launch similar reverse mortgage schemes in the near future.