What is Reverse Mortgage Loan ?Reverse Mortgage Loan is a scheme by the National Housing Bank which enables a senior citizen (of 60 years and above) to avail of periodical payments from a lender against the mortgage of his/her house while remaining the owner and occupying the house.
As of now, the duration is for 20 years.
Reverse Mortgage : Good News for Senior Citizens:For senior citizens planning to avail a reverse mortgage loan, there is good news around the corner. The National Housing Bank (NHB) is in talks with leading insurance companies to work out a scheme wherein senior citizens can avail their periodical payments till the end of their lives.
Reverse Mortgage Loan (RML), a scheme developed by the NHB, enables a senior citizen – above the age of 60 years – to avail periodical payments from a lender against the mortgage of his house while staying as the owner and occupying the house for – as of now – a maximum of 20 years.
The senior citizen borrower is not required to service the loan his/her lifetime and, therefore, does not make monthly repayments of principal and interest to the lender.
The RML is repaid by the bank out of the sale proceeds of the house mortgaged, after the death of the borrower, or him/her permanently moving out the of the house.
Covering 'Longevity Risk':
“We are in talks with insurance companies to cover the ‘longevity risk’ associated with NHB,” said S Sridhar, chairman and managing director, National Housing Bank.
In effect, the NHB and insurance companies will work out a scheme wherein – if the borrower lives beyond the stipulated 20 years of the loan, also referred as ‘longevity risk’ – the rest of the EMIs will be borne by the insurance companies.
The concept of reverse mortgage emerged last year when Finance Minister P Chidambaram, during his Union Budget speech for the year 2007-2008 , declared that NHB will introduce the scheme. Since then, the bank has disbursed loans worth Rs 550 crore to about 2,000 customers.
Initially jittery, but Widley accepted:
“Lack of clarity on issues such as property valuation and taxation was one of the reasons why borrowers found them unviable initially, but things have changed a lot since then,” said Sridhar.
Presently, all payments under RML shall be exempt from income tax under Section 10 (43) of the Income Tax Act, 1961.
India... A Growing Market:In India, senior citizens, i.e. those aged 60 and above, number around 7.7 crore, constituting 7.5 per cent of the total population (Census 2001).
This elderly population is projected to increase to 17.9 crore in 2031 and further 30.1 crore in 2051. It is projected that the elderly will constitute 12 per cent of the country’s population by 2031 and 17 per cent by 2051.
In a bid to spread the awareness of the reverse mortgage scheme, the NHB on Thursday tied up with Tina Ambani’s NGO Harmony for Silvers Foundation to set up a helpline (1800 100 1111) that will address queries and concerns of senior citizens regarding RML.
-Mumbai Mirror-The Economic Times
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