We get to see that most people cherish a lifetime ambition to own a house property, which normally materialises while they are in active economic pursuit. Time comes, soon after retirement to reflect upon the need for cash resources to sustain their livelihood. Though they may own, possess and enjoy staying in that house, cash flow issues croup up and at this juncture, owning house may be a luxury.
With MoneyMindz.com, Best On-Call Financial Advisory Portal let’s get an idea about the meaning and importance of reverse mortgage.
Features of Reverse Mortgage:
- One can stay in his own home and avails a continuous stream of cash flows to life time or for a time period of 15 years, by mortgaging the house with a Housing Finance Company or a Bank.
- There is no servicing of loans and consequently credit worthiness and repaying capacity need not be assessed.
- On the borrower’s death or on the borrower leaving the home permanently, the property is sold and the loan repaid along accumulated interest or alternatively the borrower or legal heir can repay without resorting to sale at the appropriate point of time.
- Lender is required to revalue the house once in every 5 years and adjust the quantum of moneys provided.
- Right of rescission: The borrower can rescind the contract within three business working days, after all documentation, if he changes his mind.
- Modes of disbursement: The loan can be drawn as a lump sum, or by way of fixed monthly payments for a set term/or until one lives in the home, or as a line of credit, or a combination of these.
- Utilisation of the loan funds: The proceeds from reverse mortgage can be used for supplementing post-retirement pension, undertaking repairs and renewals for the property, meeting medical expenses or settling any outstanding debts.
- Size of the cash flows: As per draft guidelines, the following percentage of the value of house can be availed as loan by the borrower depending upon his age group.
Eligibility for availing reverse mortgage:
The conditions for availing the loan under the reverse mortgage scheme are:
- The borrower should be 60 years of age and above
- There should be a clear title indicating the perspective borrower’s ownership of the property. Couples also will be eligible to borrow jointly subject to the above condition
- Only residential houses are eligible for this scheme and not commercial properties. As per guidelines, this product cannot be provided for speculative or trading purposes.
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