• Mar
  • 06
  • 2010

FAQs on Reverse Mortgage in India

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Q.1.What is reverse mortgage?

When you buy a house through a home loan, every EMI you pay towards servicing the loan increases your equity in the house. Once you payoff the loan in full, your equity in the house is 100 per cent. In reverse mortgage, exactly the opposite happens. When you pledge your house for reverse mortgage with a lending institution, your equity in your own house decreases with every disbursal that the lending institution makes to you.

Q.2 Which institutions offer reverse mortgage as a product in India?

Reverse mortgage as a product is fairly new to India. Dewan Housing Finance was the first institution in the country to come up with its reverse mortgage product-Saksham. Since then, most leading lending institutions have come up with their own reverse mortgage products.

Some of these are State Bank of India, Punjab National Bank, Bank of Baroda, Central Bank of India, Union Bank of India, LlC Housing Finance, Indian Bank, Andhra Bank, Corporation Bank and Canara Bank.

Q.3 What is the eligibility criteria for reverse mortgage?

First, Second you need to have 100 per cent equity in your should be more than 60 years of age. If your wife is a co-applicant, she  should be above 58.

Q.4 How do I apply for reverse mortgage?

Once you decide to pledge your house for reverse gage, you should ideally go to the branch of the bank with which you have a banking relationship and fill up the necessary form–provided the bank offers reverse mortgage. If your bank does not offer reverse mortgage, then approach the nearest branch of a bank that does, and fill up the form. You will need to furnish your personal and financial details: details about The property, your legal heirs, and so on. To authenticate that you own that the property, you will also need to furnish property papers and a proof that the house that you are pledging is your residence.

Q.5 How does the lending institution arrive at the amount that would be disbursed under the reverse mortgage product?

The qualifying amount of loan will depend on the realisable value of your property after maintaining a margin. This margin covers the rate of interest on the loan and any possible fluctuations in the value of the property pledged for reverse mortgage. The value of the property is evaluated every 3-5 years, depending on the lender, and this will affect the amount of funds being released to you as per the payment plan you choose.

Q.6  What are the payment options that lending institutions provide under reverse mortgage?

The money can be credited into your savings bank account or in a joint account-with the either or survivor option-in the same bank either on a monthly or quarterly basis, or as a one-time lump sum payment.

Q.7  What is the rate of interest on the amount that the bank sanctions under reverse mortgage?

The rate of interest on the reverse mortgage loan typically varies between 10 per cent and 12 per cent. However, you will not be required to pay this interest. Once you vacate the premises permanently, or in the event of your death, the lending institution will give the first option to the legal heirs of the property to settle the loan. If they are unable to settle the loan, the lending institution will sell the property and, from its proceeds take its share-principal, i.e., the total amount disbursed  as loan and the interest on it-and give the to the legal heirs.

Q.8 Is there a processing fee?

Yes, There is a processing fee. This typically varies between 0.15 per cent and 1.50 per cent of the loan amount. In some cases, apart from specifying the percentage of loan amount as processing fee, they also have an upper limit as to how much they can charge as processing fee.

Q.9 What is the maximum payment tenure that a lending institution offers under reverse mortgage?

Most reverse mortgage loan products available have a maximum tenure of 15 years, with a minimum tenure of 10 years. However, RML products of central Bank of India and Bank of Baroda can be extended further, to the advance value of the property. In case of Central Bank of India, the loan can be further extended by another five years. Punjab National Bank is the only institution that offers RML for 20 years.

Q.10 Can I prepay the amount that the lending institution disburses under reverse mortgage? Is there a pre-payment penalty?

Yes, you can prepay the loan along with the interest any time during the loan tenure. Typically, there is no pre-payment penalty.

Q.11 Is the rate of interest on the RML and the value of the house fixed for the entire tenure or are they revised at regular intervals?

Considering that real estate, like any other asset class, passes through cycles and the cost of funds for lending institutions also keep changing, most lending institutions have a reset clause in the their respective RMLs. This is to ensure that at no point during the loan tenure, the loan to value ratio exceeds the maximum unlock able value of the mortgaged property.  However, this reset clause varies across institutions. While most lending institutions have a reset clause of five years, Central Bank of India and Dewan Housing Finance have a reset clause of three years.

So, after the scheduled period, both the value of the house as well as the rate of interest will be re-evalued and necessary adjustments will be made in your monthly payments.

Q.12 What if I outlive the tenure? Can I still stay in my house?

In case you outlive your loan tenure, you will continue to live in your house. However, the lending institution may stop the monthly payments to you if the unlock able value of the property has already been exhausted.

Q.13 When will the lending institution take my house?

After your death, or if you have permanently moved out of the property, the bank will first give your legal heirs an option to settle the loan. In case of a joint loan, it will become due for recovery and payable six months after death of the last surviving spouse,

Q.14 How does the lending institution recover the money that it has given me under reverse mortgage?

If your legal heirs cannot settle the reverse mortgage loan, then the property will be sold off and after realizing its money (total advances and the accumulated interest), the bank will pass on any surplus to your legal heirs.

Q.15When does it make sense to opt for reverse mortgage?

Reverse mortgage should ideally be used to augment one’s income in the golden days in the retirement years. It should ideally be the last resort to make good of the shortfall in funds in your retirement years.


18 Responses to “FAQs on Reverse Mortgage in India”

  1. kapare ramchandra says:

    I am retired person of 62 residing in my own house.present loan balance of this is Rs 5 lacs.Valuation of property is Rs 90/lacs.I need Rs50/lacs.Can I get in one lumpsum? Whether I have to disclose the purpose?

  2. Bhasin says:

    Need a list of banks in Bangalore with names and telephone numbers of persons who can be contacted for details of Reverse Mortgage schemes.

  3. Mruthyunjaya says:

    SBI insists power of attorney to be executed to them on various clauses on property
    Is this necessary

  4. Sudarshan Sahoo says:

    I want a reverse mortgage loan on my house in Bhubaneswar costing 25 lakhs. I am now 64. My wife is 56. The house is in my name only. Please tell me whether I can apply single in my name only  as because she is below 58. I need a loan of 15 lakhs in lumpsome for marriage of my two daughters. I shall repay monthly the interest and principal too. Please guide me which bank should I go.

  5. L.RAMACHANDRA RAO says:

    iam 62 years ,old my house value 20lacks ,i want to extend my present house ,how much lump sum pay ment bank will give though rml schme? irequire 5 lacks to extend my house can i get?

  6. Prachi Sharma says:

    Is surplus passed on to legal heirs (after selling of property by bank) taxable in hands of legal heirs.? Plz give ressons for answer?

  7. Vijay says:

    When they say Rs 1 cr is the maximum amount allowed ( including interest) how much will I actually get in hand? Rs 1 cr or something less? If less can you tell me how much amount exactly?

  8. R P Pandey says:

    I am a retd person age 60+, I have my residential house in joint name with my wife age 53 yrs.I have family liabilities so I wanted extra income to supplement my pension. It was to my utmost surprise to know that I shall have to wait for 5yrs with PNB &SBI, as they have fixed min.age limit for wife as 58 yrs.had this property been in my single name, I would have been eligible right now . May I know which bank should I contact ?

  9. dharmendra surana says:

    The maximum you can get is 1 crore. That would also depend on your present age. Please share more details about you to get a better clarity.
    Regards.

  10. V Malhotra says:

    AXIS Bank is giving me Reverse Mortgage loan @12.75%,I have to pay the interest of one month is Rs.645.00 only(six four five)Per 1 Lac.Can u tell me what is the formula for calculating the interest.

  11. swetha says:

    QUESTIONNAIRES
    To bankers

    Bank Name:panjab national bank
    Branch:
    Address:
    Respondent Name:
    Designation:
    1) In your branch how many members are opted for reverse mortgage?

    2) Approximately how many enquiries about reverse mortgage you have since from its introduction?

    3) What type of promotional activities you are using to promote reverse mortgage?
    a) Broachers b) leaflets c) hoardings
    d) Paper Ads e) media

    4) What is the maximum % of loan can a senior citizen avail on his home equity?

    5) Is it possible to get a reverse mortgage if there is already existing mortgage on home? a) Yes b) no

    6) Once in how many years you re-value the mortgage house property?
    a) Once in 2 years b) once in 5 years c) once in 10 years

    7) What kind of interest rate majority of customers prefer while availing reverse mortgage Scheme?
    a) Fixed b) Floating

    8 ) What type of house is liable or eligible for applying for reverse mortgage scheme?
    a) Apartments b) single own house c) rented house

    9) What will happen to senior citizen who have availed reverse mortgage scheme after 15 yrs
    a) Eligible for further disbursement
    b) Not eligible for further disbursement in case of periodic payment from the bank.

    10) Will it be possible to pre-close reverse mortgage in the mid way of the tenure?
    a) Yes b) no
    If no give reason and explain.

    11) What is the mode of borrowing preferred by most of the customers?
    a) Lump sum b) monthly payments
    c) Combination of both d) others

    12) Is there any provision for getting a lump sum amount in the mid way of reverse mortgage Scheme?
    a) Yes b) no

    13) Are you providing any awareness programme to senior citizens on reverse
    Mortgage scheme?
    a) Yes b) no

    14) According to you what is the awareness level of reverse mortgage scheme among senior Citizens.
    a) Highly aware b) Aware c) Fairly aware
    d) Highly un-aware e) Un-aware

    15) Do you think in India this scheme will gain it’s potentialness in future
    a) Yes b) no

  12. Pratit says:

    I am based in Mumbai and trying to get Reverse Mortgage on our 2-Bedroom apartment in south Mumbai. We are really struggling to get any information on the Reverse Mortgage Scheme. We require a loan of about 20 lakhs.
    Bank of Baroda told me that they only give a lump sum under medical conditions. This is very different to what it says in the scheme.
    Also the interest charged is 15% on compound interest. I thought the scheme was for the benefit of senior citizens.
    We are really struggling to get the right information. Can someone please help us.
    Thanks

  13. subhajit saha says:

    which bank provide reverse mortgage in jalpaiguri?

  14. Raghav says:

    We need a loan of around 15 Lakhs. We have a property worthy around 50 Lakhs in the market. We approaced SBI for the reverse mortage loan. But they valued the property at 23 Lakhs and say they can only give a loan of 4 Lakhs. Is this correct? How does one go about getting a larger reverse mortgage loan?

  15. Madhav.K says:

    1) can i live in my property with tenants for additional income source.
    2)can i renew my property (additional constriction)
    during loan period
    3)In my case i & my wife can not live in that house
    throughout year for medical reason,though that house
    is my permanent adders.

  16. Madhav.K says:

    1) can i live in my property with tenants for additional income source.
    2)can i renew my property (additional constriction)
    during loan period
    3)In my case i & my wife can not live in that house
    throughout year for medical reason,though that house
    is my permanent adders.

  17. Subhransu Tripathi says:

    I guess there will be no bank to do teh same as in india there is a cap to reverse mortgage loan of 50 lacs max.

  18. NRSMurthy says:

    which bank in bangalore gives a loan of rs.3 cr loan under reverse mortgage loan scheme. kindly send me a reply on my e mail id

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