Reverse Mortgage Loan – Brief, Process & its Types

According to a report, the population of senior citizens in India is predicted to become equal to its under-18 population by 2050. This increase can be attributed to medical advancement, which has boosted life expectancy. 

Nonetheless, residing in the country requires elderly citizens to deal with the cost of living and simultaneously meet emergency funding requirements. In this situation, a smart alternative can be availing a reverse mortgage loan. 

This credit option ensures that an individual’s golden years are financially secure and hassle-free.

What does reverse mortgage loan in India mean?

A reverse mortgage loan is a credit form that allows homeowners to mortgage their property and exchange its equity for funds. This loan variant is designed to aid a senior citizen access a regular income source without repayment liability. Borrowers can utilise the funds to manage their big-scale expenses like medical emergencies, house renovation, etc., along with daily living costs.

Typically, under the reverse mortgage credit, a lending institution offers funds or payments to the borrower, unlike the conventional loan, which obligates a monthly interest outgo. In the Indian market, there are two variants of this loan form, namely regular reverse mortgage loan and reverse mortgage loan enabled annuity.

What are the reverse mortgage benefits?

  • Zero restrictions on usage – 

The advance against a reverse mortgage loan comes with no restriction on usage. This allows senior citizens to utilise the funds to meet varied requirements. 

  • No obligation on repayment –

Unlike a normal loan against property, this credit form doesn’t come with a repayment obligation. A borrower remains the owner of the property and receives funds against it, in a lump sum or on a regular payout basis. In case of a borrower’s demise, the next of kin or spouse will retain the mortgage’s rights. The family member can then choose to repay the loan amount or relinquish the property’s rights. 

  • Easy eligibility criteria – 

To avail a reverse mortgage credit, applicants need to fulfil minimum requirements like –

  1. An applicant needs to fall in the age bracket of 60 years or above.
  2. He/she should hold the property ownership.
  3. The mortgage shouldn’t have a dispute or legal discrepancy.
  4. Applicants should be residing in a property for more than twenty years.

How to make a reverse mortgage loan payment?

Due to digitisation, the application for reverse mortgage credit can be completed online in just a few steps. 

  • Visit the preferred lending institution and select the reverse mortgage loan option.
  • Fill the form with relevant personal and professional details.
  • A representative will get in touch with the applicant. 
  • He/she needs to submit the required documents.
  • After verification, the lender approves the application.

However, if an individual fails to fulfil the eligibility criteria or documentation, they can opt for alternatives like a loan against property. 

This is a high-value funding option that offers credit against an affordable loan against property interest rate. Under LAP, borrowers get the flexibility to choose the repayment tenor and ease EMI payment. In this regard, understanding the charges on loan against property helps to generate additional savings.

One can also find pre-approved offers from reputed HFCs, which simplify the loan application process. Such offers are available on financial products like home loans, loan against property, etc. Check your pre-approved offer online by sharing some essential details. 

To streamline this process further, one can check the list of documents required to apply for a loan against property and arrange them accordingly. This would further help an applicant to negotiate with the lender regarding better terms.

A reverse mortgage loan is an ideal financial product for retired individuals searching for ways to secure a regular source of funds. This credit form comes with multiple features; however, if an individual is unsatisfied with loan terms, he/she can look for a LAP loan instead. 

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