Reverse Mortgage

Three Cheers for Grand-pa's and senior citizens!
Why to depends on your insensitive children who don't want to keep you and insist to throw you with your wife in old age home. To hell with those emotionless youngsters. Now you can peacefully live in your own without any worry.
Reverse Mortgage is the solution.
The bank would make tax-free payments to the house-owner for life. If a person lives beyond that fixed & agreed tenure, the loan may be renewed.

Reverse Mortgage seeks to monetize the house as an asset and specifically the owner's equity in the house. The scheme involves the Senior Citizen borrower(s) mortgaging the house property to a lender, who then makes periodic payments to the borrower(s) during the latter's lifetime. The Senior Citizen borrower is not required to service the loan during his lifetime and therefore does not make monthly repayments of principal and interest to 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 borrower(s)/heir(s) can also repay or prepay the loan with accumulated interest and have the mortgage released without resorting to sale of the property. Reverse mortgages are one product within the “Equity Release” category.

Eligible Borrowers:

• Should be Senior Citizen of India above 60 years of age.
• Married couples will be eligible as joint borrowers for financial assistance. In such a case, the age criteria for the couple would be at the discretion of the bank, subject to at least one of them being above 60 years of age.
• Should be the owner of a self- acquired, self occupied residential property (house or flat) located in India , with clear title indicating the prospective borrower's ownership of the property.
• The residential property should be free from any encumbrances.
• The residual life of the property should be at least 20 years.
• The prospective borrowers should use that residential property as permanent primary residence.
• Determination of Eligible Amount of Loan:

• The amount of loan will depend on market value of residential property, as assessed by the bank, age of borrower(s), and prevalent interest rate.
• The table given hereunder may serve as an indicative guide for determining loan eligibility :

Age	Loan as proportion of Assessed Value of Property
60 – 65	40%
66 – 70	50%
71 – 75	55%
Above 75	60%

Nature of Payment:

Any or a combination of the following:

• Periodic payments (monthly, quarterly, half-yearly, annual) to be decided mutually between the bank and the borrower upfront
• Lump-sum payments in one or more tranches
• Committed Line of Credit, with an availability period agreed upon mutually, to be drawn down by the borrower

Lump-sum payments may be made conditional and limited to special requirements such as medical exigencies, home improvement, maintenance, up-gradation, renovation, extension of residential property etc. The PLIs may be selective in considering lump-sum payments option and may frame their internal policy guidelines, particularly the eligibility and end-use criteria. However, these conditions shall be fully disclosed to potential borrowers upfront .

End use of funds

The loan amount can be used for the following purposes:

• Up gradation, renovation and extension of residential property.
• For uses associated with home improvement, maintenance/insurance of residential property
• Medical, emergency expenditure for maintenance of family
• For supplementing pension/other income
• Repayment of an existing loan taken for the residential property to be mortgaged
• Meeting any other genuine need

Use of RML for speculative, trading and business purposes shall not be permitted

Period of Loan: Maximum 15 years.

7. Interest Rate: The interest rate (including the periodic rest) to be charged on the RML to be extended to the borrower(s) may be fixed by the bank in the usual manner based on risk perception, the loan pricing policy etc. and specified to the prospective borrowers.

Security:

• The RML shall be secured by way of mortgage of residential property, in a suitable form, in favour of PLI.
• Commercial property will not be eligible for RML.

Provision for Right to Rescission:

After the documents have been executed and loan transaction finalized, Senior Citizen borrowers may be given up to three business days to cancel the transaction, the “right of rescission,”. If the loan amount has been disbursed, the entire loan amount will need to be repaid by the Senior Citizen borrower within this three day period. However, interest for the period may be waived at the discretion of the bank.

Loan Disbursement by Lender to Borrower:

• The bank will pay all loan proceeds directly to the borrower, except in cases pertaining to retirement of existing debt, payments to contractor(s) for the repairs of borrower's property, or payment of property taxes or hazard insurance premiums from the borrower's account set aside for the purpose.
• In case the residential property is already mortgaged to any other institution, the bank may, at its discretion, consider permitting use of part proceeds of RML to prepay/repay the existing housing loan. The loan amount will be paid directly to that institution to the extent of the loan outstanding with that institution with a view to release the mortgage.
• Periodicity: The loan will be extended as regular monthly, quarterly, half-yearly or annual periodic cash advances or as a line of credit to be drawn down in time of need or in lumpsum.
• The bank will have the discretion to decide the mode of payment of the loan including fixation of loan tenor, depending on the state and market value of the property, age of the borrower and other factors. The rationale behind the decision of mode of payment and fixation of the loan tenor shall be clearly disclosed to the borrowers.

Closing:

The bank will provide in writing, a fair and complete package of reverse mortgage loan material and specimen documents, covering inter-alia, the benefits and obligations of the product.

• The loan shall become due and payable only when the last surviving borrower dies or would like to sell the home, or permanently moves out of the home for aged care to an institution or to relatives. Typically, a "permanent move" may generally mean that neither the borrower nor any other co-borrower has lived in the house continuously for one year or do not intend to live continuously. Bank may obtain such documentary evidence as may be deemed appropriate for the purpose.
• Settlement of loan along with accumulated interest is to be met by the proceeds received out of Sale of Residential Property.
• The borrower(s) or his/her/their estate shall be provided with the first right to settle the loan along with accumulated interest, without sale of property.
• A reasonable amount of time, say up to 2 months may be provided when RML repayment is triggered, for house to be sold.
• The balance surplus (if any) remaining after settlement of the loan with accrued interest, shall be passed on to the estate of the borrower.

Prepayment of Loan by Borrower(s)

• The borrower(s) will have option to prepay the loan at any time during the loan tenor.
• There will not be any prepayment levy/penalty/charge for such prepayments.

This scheme is very good for old parents. They can't be driven out by their children.