A reverse mortgage (or lifetime mortgage) is a special loan offered to the senior citizens. Reverse mortgage, as its name suggests, is exactly opposite of a typical mortgage or a home loan. In a typical mortgage, money is borrowed in a lump sum amount right at the beginning and then, it is paid back over a period of time using equated monthly installments (EMIs). But, in a reverse mortgage, an individual pledges a property that is already owned by him or her. In turn, the bank or a lending authority offers a series of cash-flows for a fixed tenure to the individual. In other words, individual receives reverse EMIs for the agreed tenure period.
As per the standard norms and rules, the tenure period for this mortgage is 15 years and the owner of the house and his/her spouse continue to live in the house till their death, which may or may not occur at the end of the tenure. Following are the features of this type of mortgage or loan:
· Any house owner who have attained the age of 60 years is eligible for a reverse mortgage
· The maximum loan amount can be sanctioned up to 60% of the value of the residential property
· The maximum period of property mortgage is 15 years with any bank or financial institution
· The borrower can choose for a monthly, quarterly, annual or lump sum payments at any point, as per his convenience.
· The revaluation of the property has to be undertaken on the account of bank in every 5 years
The amount received through reverse mortgage is considered as loan and not income; hence the same will not attract any tax liability. Reverse mortgage rates can also be fixed or floating and hence may vary according to market conditions.