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    Reverse Mortgagge in India

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    Dhruv Raj Singhai
    Reverse mortgages allow senior homeowners to borrow against the equity in their home. They receive either a lump sum payment or regular payments from the lender. No repayment is required as long as the homeowner lives in the home, and the loan is repaid when the home is sold, such as after the death of the homeowner. To qualify, homeowners must be over 62 and own their home outright or have little remaining on their existing mortgage. The maximum loan limit is $625,000. Reverse mortgages can provide funds for retirement needs while allowing seniors to remain in their homes.

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    Reverse Mortgagge in India

    Uploaded by

    Dhruv Raj Singhai
    109 views10 pages
    Reverse mortgages allow senior homeowners to borrow against the equity in their home. They receive either a lump sum payment or regular payments from the lender. No repayment is required as long as the homeowner lives in the home, and the loan is repaid when the home is sold, such as after the death of the homeowner. To qualify, homeowners must be over 62 and own their home outright or have little remaining on their existing mortgage. The maximum loan limit is $625,000. Reverse mortgages can provide funds for retirement needs while allowing seniors to remain in their homes.

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    Reverse mortgages allow senior homeowners to borrow against the equity in their home. They receive either a lump sum payment or regular payments from the lender. No repayment is required as long as the homeowner lives in the home, and the loan is repaid when the home is sold, such as after the death of the homeowner. To qualify, homeowners must be over 62 and own their home outright or have little remaining on their existing mortgage. The maximum loan limit is $625,000. Reverse mortgages can provide funds for retirement needs while allowing seniors to remain in their homes.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    109 views10 pages

    Reverse Mortgagge in India

    Uploaded by

    Dhruv Raj Singhai
    Reverse mortgages allow senior homeowners to borrow against the equity in their home. They receive either a lump sum payment or regular payments from the lender. No repayment is required as long as the homeowner lives in the home, and the loan is repaid when the home is sold, such as after the death of the homeowner. To qualify, homeowners must be over 62 and own their home outright or have little remaining on their existing mortgage. The maximum loan limit is $625,000. Reverse mortgages can provide funds for retirement needs while allowing seniors to remain in their homes.

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    REVERSE MORTGAGE

    APOORVA DUBE

    www.studygalaxy.com

    What Is Reverse Mortgage


    In 2007, the finance minister of India introduced a

    concept well-known and widely accepted in the West: Reverse Mortgage. A reverse mortgage (or lifetime mortgage) is a loan available to senior citizens. Reverse mortgage, as its name suggests, is exactly opposite of a typical mortgage, such as a home loan.

    How does it work?


    In a typical mortgage, you borrow money in lump sum right

    at the beginning and then pay it back over a period of time using Equated Monthly Instalments (EMIs). In reverse mortgage, you pledge a property you already own (with no existing loan outstanding against it). The bank, in turn, gives you a series of cash-flows for a fixed tenure. These can be thought of as reverse EMIs. The specific format National Housing Board (the facilitator for housing finance in India) is promoting is one in which, the tenure is 15 years and the owner of the house and his/her spouse continue to live in the house till their death -- which can occur later than the tenure of the reverse mortgage. Simply put, any senior citizen, opting for reverse mortgage will get annuity (the reverse EMI) from the bank for 15 years. After that, the annuity payments stop. However, they can

    How is the loan paid?


    With a reverse home mortgage, no payments are

    made during the life of the borrower(s). Since no payments are made during the term of the reverse home mortgage loan, the loan balance rises over time. In most areas where appreciation is good, the value of the home grows at a much faster rate than the loan balance. Therefore, the remaining equity continues to grow. When the last borrower passes, or it is decided to sell the home and move, the loan becomes due. The ownership of the home is then passed to the estate or directed by a living will or will to the beneficiaries. The beneficiaries now own the home and have to sell the home or pay off the loan. If the home is sold, the reverse home mortgage lender is paid off and the

    How Do Reverse Mortgages Work?


    Once the property is sold-and this can be during the homeowner's

    lifetime or after his or her death-the sale price of the property pays back the loan. This rule is in place even if the sale price is less than the combination of the loan and interest (referred to as a short sale). Because reverse mortgages are backed by HUD, if there is a short sale HUD will pay the difference. Lenders cannot-by law-go after the homeowner's other assets or the estate, so there's no need to worry that your children will have to pay the difference from their inheritance. HUD offers five options for receiving your payments: Tenure - equal monthly payments, as long as at least one borrower lives and continues to occupy the property as a principal residence. Term - equal monthly payments for a fixed period of months selected. Line of Credit- unscheduled payments or installments, at times and in amounts of your choosing, until the line of credit is exhausted. Modified Tenure - a combination of line of credit plus monthly payments, for as long as you remain in the home. Modified Term - a combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.

    How Do You Qualify for a Reverse Mortgage?


    To be eligible for a HECM reverse mortgage:

    You must be age 62 or older. You must either own your home outright or have a low

    mortgage balance that can be paid off at closing with proceeds from the reverse mortgage. You must live in the home. The home can be a single family home or a 1-4 unit home as long as one unit is occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible. You must receive consumer information from an approved HECM counselor before obtaining the loan. Contact the Housing Counseling Clearinghouse at (800) 569-4287 for the name and telephone number of a HUD-approved counseling agency and a list of FHA-approved lenders in your area.

    What are the Rules of Reverse Mortgages?


    To reduce their risk, lenders generally limit

    reverse mortgage loans to amounts that are below their estimate of the property's full value. Age is an advantage when applying for a reverse mortgage. Borrowers must be at least age 62, and the older the homeowner is, the more money he or she would qualify for. For example, a 78year-old borrower would qualify for a larger loan than a 62-year-old.

    What are the Limits on Reverse Mortgages?


    The HUD limit on reverse mortgages is $625,000.

    If you are considering a reverse mortgage, it's

    important to get as much information as you can, and to consider all of your options. For many older homeowners, selling your home and moving to a less expensive home is the best way to protect your assets for yourself and your family.

    Scheduling
    Repayment of Reverse Mortgage Loan: The homeowner and

    now the borrower will not be required to repay the loan during his lifetime. On his death or leaving the house permanently, the loan along with the accumulated interest is repaid through the sale of the property pledged. Home Value Falling Short: In case the accumulated interest and loan amount is larger than the value of the mortgaged property, the mortgage loan is capped at the value of the home equity only and the lender is the party at loss. Home Value in Excess: Any excess amount by the sale of the property is duly remitted to the borrower incase of permanent leaving of the house or his heirs in case of the death of the borrower. Freeing the property from reverse mortgage: In case you get an additional income and accumulate an amount to repay your loan, you can free your property in mid term and can also apply for re-reverse mortgage if required on the same property

    Reverse Mortgage Lenders in India


    The major reverse mortgage lenders in India or the banks and

    financial institutions providing reverse mortgage in India include: National Housing Bank (NHB) Dewan Housing Finance Limited (DHFL) State Bank of India (SBI) Punjab National Bank (PNB) Indian Bank Central Bank of India Reverse mortgage is a way of getting the benefits of your home equity by retaining the home ownership and also without having to make any repayments. The senior citizens in India will definitely find reverse mortgage a solution for their financial needs after retirement and help them in regaining their feeling of independence.

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