What is the reverse mortgage scheme?
This scheme is exact ‘reverse’ of plain home loan scheme. In case of a home loan one takes a lump sum loan and repays it in instalments in future. Under the reverse mortgage scheme, you get instalments and the loan is repayable in lump sum in future.
Here, the payment stream comes to the borrower for a fixed period of time in the form of monthly, quarterly or yearly payments. The maximum permissible monthly payments under this scheme cannot exceed Rs. 50,000 per month.
You can even get lump sum payments under reverse mortgage loan however the total amount which you can get as lump sum which cannot be more than 50 percent of the total eligibility amount subject to a maximum of Rs. 15 lakh.
The one time lump sum loan can only be taken for the purpose of meeting medical expenses for yourself, your spouse or any dependent person.
The money receivable under regular reverse mortgage scheme money so borrowed can only be used for the genuine needs of the owner like medical emergencies, day to-day expenses, repairs and renovation or repayment of loan taken for the same property.
It is important to note that should not be used for any speculative purpose.
Reverse Mortgage Loan (RML)
Reverse Mortgage Loan (RML) enables a Senior Citizen above 60 years age in India. The idea is to avail of periodical payments/ lump sum amount from a lender against the mortgage of his/her house. Such a loan allows the borrower to continue to occupy his house as long as he lives. Unlike other loans, reverse mortgage need not be repaid by the borrower. The maximum period of the loan (over which the payments can be made to the reverse mortgage borrower) is 20 years. The lender on the other hand has to value the property periodically at least once in five years and the quantum of loan may be revised based on such re-valuation of property at the discretion of the lender. On the borrower’s death or on the borrower leaving the house property permanently, the loan is repaid along with accumulated interest, through sale of the house property. The borrowers or their heirs also have the option of prepaying the loan at any time during the loan tenor or later, without any prepayment levy. In the usual mortgage, as the regular mortgage payments are made the outstanding loan decreases and the house equity increases. Reverse is the case in reverse mortgage, the loan amount increases with time and the home equity decreases with time.