Top 5 Quick Points to know About Reverse Mortgage

Reverse mortgage

As per a report released in 2019, about 6% of India’s total population consists of individuals aged 65 years and above. Out of them, the majority are not covered under any pension scheme and rely on their savings to meet the daily cost of livelihood. It often leads to financial crunches, especially during emergencies, and such individuals are left to fend for themselves in the times of crisis.

The reverse mortgage loan scheme was thus introduced in 2007 to alleviate the difficulties arising during such situations. Under this scheme, individuals above 60 years of age can tap into a steady inflow of cash by reverse mortgaging their residential properties to the financial institutions offering this scheme. Following is a look at what reverse mortgage entails and some important points that one should be aware of before opting for it.

What does the reverse mortgage loan scheme entail?

A reverse mortgage is a facility under which individuals can leverage the equity lying in their residential property to receive monthly payouts against them via a financial institution.

With the reverse mortgage advance, however, individuals can do away with the risks of default, which is extremely beneficial for senior citizens without a steady source of income.

Apart from this, below are the 5 most important points to note about reverse mortgage –

  • Repayment of the borrowed amount

Under reverse mortgage schemes, the borrowed amount is not recovered until the completion of the tenor or the borrower’s demise. Further, a borrower has to repay the amount availed under the scheme only if he/she decides to move out of the house or sell it.

Further, in the event of the borrower’s demise before the completion of loan tenor, the repayment liability shifts to his/her heir if opted for. On the contrary, the lending institution can auction off the reverse mortgaged property to recover the cost of this loan.

Eligibility to opt for a reverse mortgage

There are a few criteria that most financial lenders put forth to deem an individual eligible to opt for this facility. These are –

  • Borrowers must be at least 60 years of age or above. While opting for a reverse mortgage jointly with spouse, at least one of the applicants has to be at least 60 years of age, while the other must be at least 55 years old.
  • Properties to be mortgaged should be owned or occupied by the borrower. Individuals cannot avail a reverse mortgage loan against properties that are let out.
  • The said property must be free of any legal liabilities.

Fees and charges associated with a reverse mortgage

Just like the charges of your LAP, you need to bear a few types of expenses when opting for a reverse mortgage advance. These are –

  • Statutory charges like mortgage registration, stamp duty, etc.
  • Fees levied for loan processing.
  • If borrowers choose to switch lenders, they must also bear prepayment charges.

Documents required to avail reverse mortgage

To ensure that the application process to avail reverse mortgage benefits is hassle-free, individuals must ensure that they keep these following documents handy –

  • Identity proof like Aadhaar card, PAN, voter ID, etc.
  • Proof of address like passport, utility bills, etc.
  • Photographs
  • Proof of ownership and residence of property. These documents can include property tax receipts, title deed, etc.

Even though the list of documents required can vary from one financial institution to another, most lenders make reverse mortgages available at minimal documentation requirements.

Alternatively, individuals can also avail a loan against property against minimum eligibility requirements and repay at competitive rates with select lenders.

Furthermore, these lenders also bring pre-approved offers that make availing these credits faster and more streamlined. These offers are available on several financial products, including loans against property, home loans, etc. Individuals can check their pre-approved offer by providing their name and contact numbers.

Loan amount available

The loan amount available under reverse mortgage is determined by taking a few factors into consideration. These include the property’s current market value, age of the borrower and the lender’s margin.

These are a few points that individuals must remember before opting for a reverse mortgage loan to meet their financial requirements. Nonetheless, those failing to comply with the eligibility criteria set for this option can easily choose to apply for a loan against property to meet their financing needs. Unlike reverse mortgage, these loans can be availed by all, and can also be convenient in addressing a plethora of funding needs similar to the former.


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