A ray of hope in reverse mortgage
|
If you have a house or an apartment there is scope for getting a definite and stipulated payment on reverse mortgage basis. There are legal aspects one needs to know before taking a decision.
|
To supplement income: Reverse mortgage facility can be used for renovation, extension or betterment of residential property.
Insecurity grows with age. Several issues trouble elders. Many small matters may look very big when one is advanced in age. Worries are constant companions. There are some solutions too. Reverse mortgage is a product specially designed for those who have reached a particular age. It is being offered as one of the solutions to address aspects of income and insecurity at old age. It is desirable to have an understanding of this subject.
A person who is well employed may have retired. Circumstances may be such that savings are not much. There is a sudden deprivation of a stream of income. The position can be traumatic. Such a person may, however, have acquired a house or an apartment during service. There is a need to supplement the pension or other income.
There was a time when no facility of any kind could be obtained by a senior citizen of the type referred to above. Now, there is hope; there is a choice.
If you have a house or a residential apartment, then there is scope for obtaining a definite and a stipulated payment on a reverse mortgage basis. If you are a person over 60 years of age, you are eligible. If you need the facility, you have to mortgage your house property to a bank or an institution who will accept the same. The agreed payment for the mortgage value is thereafter paid by the bank or the institution to you usually, for a maximum period of 15 years. You are not required to service the loan during your lifetime. If you leave the property permanently, you have to repay the loan together with accumulated interest.
In the event of the death of the borrower, the legal heirs may repay the amounts due. If not, the lender will sell the property and adjust the outstandings. If the loan is repaid during the lifetime of the borrower or by the legal heirs, the lender will not sell the property which will revert to the owners.
The husband and wife can be joint borrowers, if they meet the eligibility norms. In such an event, one of them should be over 60 years of age. The property should be self-acquired and self-occupied. The title must be clear and free of doubts and encumbrances. It should be the primary residence of the borrower. The facility cannot be obtained for commercial or non-residential properties.
Interestingly, the older the person, the higher is the quantum a person is likely to get for this facility. You are entitled to know the full particulars of the grant of loan. You have to work out a schedule for payments which is agreeable to the Lender. The amounts can be disbursed as a lump sum or on a committed line, which can be drawn by you.
Supplementary income
You can use this facility only for certain requirements. This could be for renovation, extension or betterment of the residential property; or you can have the payments for medical emergencies. This can also be used to supplement your income. Any other genuine need may be considered by the Lender. You cannot use this facility for commercial purposes like trading, setting up a business, etc.
The property against which the facility is obtained has to be mortgaged to the Lender. Interest and other charges as per the Lender’s policy and RBI and NHB directives would apply. Interest may be floating or fixed. You may have an option to convert at a cost.
One of the features of this facility is that you would be given a short period to reconsider your decision to avail the facility. If you feel that it is onerous or you have doubts on certain issues, you can cancel the mortgage by the exercise of rights provided under the documentation during the period of reconsideration. Any money received by you prior to this period will have to be refunded as per applicable norms. However, there may be a pondering cost.
There may be other costs associated with the facilities. This will include cost of valuation, obtaining legal opinions, insurance, stamp duty, registration charges, etc. You must have a clear idea of this.
The loan would become repayable on the terms of documentations signed. Generally, it could be the time that you want to move out of the property. In the unfortunate event that you are not around to settle the payments, your legal heirs or the beneficiaries of your estate would be given the first choice to settle the outstandings. Only if repayment is not effected, the Lender will enforce the sale option.
In the event of sale and there being any surplus available with the Lender, the same should be passed on to you or your estate as the case may be. You will also normally have an option to prepay the loan during the tenure of the loan. The Lender may not levy any charges for prepayment as a policy.
You may have to give a commitment that you will continue to reside in the property. The Lender may also require you to execute and register a Will in the format required by them. Further, you have to give a declaration that you shall not revoke the Will nor make any other Will or Codicil. You may not be in a position to give a Power of Attorney to any person to deal with and sell the property. You cannot part with possession of the property. You may not be able to execute settlement deeds, except with the consent and in the format approved by the Lender. You have to produce proof of payment of insurance, property taxes, etc during the subsistence of the facility. Generally, you will have to think as to whether any of your acts will affect the interest of the Lender. Otherwise, you may face certain unexpected difficulties.
The Bank or institution will have the right to foreclose the loan, if there is a violation of any of the undertakings. In the event that you are away from the property for a period of over one year, it may be taken that you have shifted your permanent residence. The best thing is to keep the Bank or Institution informed of any significant development relating to the facility. Similarly, the Lender is expected to have complete transparency of all aspects relating to the facility.
At your age, caution may be the watchword. There are many things to muse; to consider. Many doubts may arise. It may be a difficult thing for you to decide on the necessity or otherwise of availing this facility. The decision may have a far reaching effect. Banks and Institutions will provide you necessary information and particulars. You may, however, have to consult many persons and also professionals before deciding the issue. This may be difficult as you may be in a position of being consulted for many matters. However, it is worth the while.
Printer friendly
page
Send this article to Friends by
E-Mail
Property Plus
Bangalore
Chennai
Hyderabad
Kochi
Thiruvananthapuram
