If you go in for a reverse mortgage, you stay in your own house for life!

No Compromise in Standard of Living: If you adopt the above strategy of renting your house, in all probability, you would stay in a smaller house or in a far off place to save on rent. This means you compromise your standard of living.

If you go in for a reverse mortgage, you stay in your own house – where you have been living – for life.

No Income Tax: The money you get every month from the bank is tax-free. Yes, there is no income tax to be paid on this! The amount you receive from reverse mortgage is not taxable. This is a big relief for senior citizens!

Disadvantages

The only disadvantage of a reverse mortgage is that you can’t give your house to your kids or heirs, as the bank retains the right to sell it to recover its money.

But again, if your legal heirs want it, they can always pay the owed amount to the bank, and retain the house!

Is Reverse Mortgage for You?

Reverse mortgage is specifically designed for senior citizens to help them in their retirement. There are age restrictions on reverse mortgage. Thus, not everyone can go in for it.

Reverse mortgage is right for you if:

• You are over the stipulated age limit for reverse mortgage
• You own a house
• There is no pending loan liability for it (that is, you have paid the entire home loan, and you haven’t taken any “loan against property” for that house)
• You do not have a lump sum to invest and earn a monthly interest
• You do not earn a pension or the pension is not sufficient to cover your expenses

Reverse Mortgage in India

The budget presented in 2007 gave a green signal for introducing reverse mortgage products in India. Since then, many banks have started offering this product.

(Download a spreadsheet containing a detailed comparison of reverse mortgage products offered by Punjab National Bank (PNB), Indian Bank, State Bank of India (SBI) and Corporation Bank)

(You need to be logged-in to download the spreadsheet. For free registration that takes less than a minute, please click here. To know the benefits of registration, please click here.)

The eligibility criteria is more or less the same across the banks: The person has to be the owner of the house / flat, has to be living in the house, and should have bought the house on his / her own (hereditary property is not considered). The person also has to be a resident of India.

Punjan National Bank (PNB) was the first public sector bank (PSB) to offer a reverse mortgage product in India. PNB offers it under the brand "PNB Baghban".

The minimum age at the start of the contract is 60 years. The Loan to Value ratio is 80%.

The rate of interest applicable is 10% per year (fixed rate), and is subject to reset every five years. The loan is given for 10 to 20 years.

You get between Rs. 490 and Rs. 135 per month per Lakh of the reverse mortgage amount, depending on the tenure.

Indian Bank calls its reverse mortgage product "Reverse Mortgage for Senior Citizens".

The minimum age at the start of the contract is 60 years.

The rate of interest applicable is 10% per year (fixed rate), and is subject to reset every five years. The loan is given for 15 years.

You get Rs. 555 per month per Lakh of the reverse mortgage amount, depending on the tenure.

State Bank of India (SBI) calls its product "SBI Reverse Mortgage Loan (RML)".

The minimum age at the start of the contract is 60 years. The Loan to Value ratio is 90%.

The rate of interest applicable is 10.75% per year (fixed rate), and is subject to reset every five years. The loan is given for 10 to 15 years.

You get Rs. 468 or Rs. 225 per month per Lakh of the reverse mortgage amount, depending on the tenure.

Corporation Bank offers its reverse mortgage product under the brand "Corp Shelter Loan Scheme".

The minimum age at the start of the contract is 55 years for the younger spouse. The Loan to Value ratio is between 45% and 70%.

The rate of interest applicable is 10.5% per year (fixed rate), and is subject to reset every five years. The loan is given for 5 to 15 years.

You get between Rs. 1263 and Rs. 228 per month per Lakh of the reverse mortgage amount, depending on the tenure.

Other companies offering Reverse Mortgage in India are LIC Housing Finance, Bank of Baroda – BoB (Baroda Ashray Reverse Mortgage Loan) and Vijaya Bank (V-Reverse Mortgage Loan Scheme), among others.

(Download a spreadsheet containing a detailed comparison of reverse mortgage products offered by Punjab National Bank (PNB), Indian Bank, State Bank of India (SBI) and Corporation Bank)

(You need to be logged-in to download the spreadsheet. For free registration that takes less than a minute, please click here. To know the benefits of registration, please click here.)

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