A reverse mortgage allows senior citizens to borrow funds against the value of their house. As the name suggests, these loans are the exact opposite of forward mortgages and do not require the homeowner to make any monthly payments. Instead, through reverse mortgage loans, the homeowner receives money in monthly payments, lump sum, or line of credit.

The difference between forward mortgages and reverse mortgages

Forward mortgages or mortgages are secured loans to avail of funds by depositing your house or commercial property as collateral.

On the other hand, reverse mortgages are credit facilities tailored to fulfil the funding requirements of senior citizens. Homeowners over the age of 60, who own property, can borrow money against the value of their residential property. Similar to home loan interest rates, reverse mortgage rates vary from one lender to another.

The initial principal amount depends on several factors, including:

  • Existing market value of the property
  • Age of the borrower
  • Interest rate charged
  • Lending margin

Here, the lending margin indicates the gap between the amount borrower receives and the value of the property against which the loan is borrowed.

How do reverse mortgages work?

Here’s how a reverse mortgage works:

  • The homeowner can avail of a lump sum or periodic funding against the house for the agreed amount of time.
  • Either one or both members of the couple can continue to live in the property for their lifetime.
  • If the loan is repaid, the borrower can reclaim its property rights.
  • Unlike home loans, there is no need for repayments during the borrower’s lifetime. The total amount is only payable when the homeowner moves away permanently, sells the home, or dies.
  • If the borrower dies, the legal heir can repay the loan and own the house.

Additional Read: Reverse Mortgage Loan: Pros and Cons

Eligibility criteria

The eligibility conditions for reverse mortgages can differ depending on the lender. The standard criteria are as follows:

  • The applicant should be a resident of India.
  • The applicant must be aged above 60 years. In the case of joint borrowers, the spouse’s age should not be less than 58 years.
  • The borrower must own the residential property.
  • The property must not be older than 20 years.
  • The house should be free from legal disputes, claims, or liabilities.

Additional Read: Is It Possible to Increase Your Home Loan Eligibility?

In conclusion

A reverse mortgage can serve as a beneficial financial tool for senior citizens. Besides, you can use the funds to manage your healthcare expenses, consolidate debt, or finance your post-retirement travel plans.

At Tata Capital, we provide easy home loans at competitive home loan interest rates and extended loan tenures for senior citizens and younger people alike. Our loans are available at simple eligibility conditions and entail minimal paperwork. Moreover, we offer structured EMI plans, multipurpose loan offerings, high loan amounts, and quick loan disbursals.

With Tata Capital, you can also enjoy flexible repayment options. Use our online home loan EMI calculator to quickly calculate your EMIs, interest payable, and evaluate your repayment capacity. To know more, get in touch today!

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