Important Things To Consider Before Availing A Reverse Mortgage Loan

Reverse mortgage loan (RML) was introduced in India in 2017 to offer a formal source of finance to the senior citizens after retirement. Individuals who own a property but do not want to sell it can avail a reverse mortgage to secure a steady financial support by monetising the value of their residential property.

This credit option entitles an individual above the age of 60 to mortgage their self-occupied property to the desired lender to avail a loan in instalments or as a lump sum.
There are several key things to know about a reverse mortgage that a prospective borrower should be aware of before applying for a credit. Consider the points mentioned below to get the best deals for your reverse mortgage credit.

Property Valuation

Financial institutions conduct a thorough assessment of a property before they decide the amount that you can avail for a reverse mortgage in India. Various factors are taken into account before deciding upon the valuation like the current demand for a property, market conditions, price fluctuations and the condition of the house.

A lender evaluates the mortgaged property every 5 years and changes the amount of if there is any change in property valuation. Consider these factors beforehand when you opt for a reverse mortgage; mortgaging a property that is in a state of depreciation may not be a wise option to avail reverse mortgage.

In such situations, one can avail a loan against property because these loans are processed differently. Lenders determine the loan amount at the start of tenor, and no changes occur in that aspect.

Payment options

After you mortgage a property, you will be eligible to receive a fixed amount in monthly, quarterly, annually or as a lump sum payment. It allows a borrower to avail the sanctioned amount according to their convenience. However, the maximum amount that you can avail in a month under the reverse mortgage scheme is capped at Rs. 50,000.

A reverse mortgage also provides an opportunity for a borrower to avail emergency funds. You can avail up to 50% of the total sanctioned amount or a sum of Rs. 15, 00,000 (whichever is lesser) in case of medical emergencies.  Moreover, most lenders offer a diverse range of payment options so that you can opt for a method according to your requirements.

Settlement Clauses

A reverse mortgage loan turns due after the demise of the borrower or when that individual decides to sell off the property. In case of death, lenders will either auction the property or ask the descendants of the borrower to pay off the debt. In case of being unable to repay the debt, lenders recover the amount by selling the property. If there is any surplus amount obtained, it is paid to the legal heirs.

Also, lenders have implemented several borrower-friendly policies to offer similar kind of benefits to all the related family members. It ensures that the risk associated with the foreclosure of such loans is reduced.

Reverse mortgage can be availed jointly by members of a family. The spouse of the borrower will be eligible to enjoy similar benefits even after the demise of the borrower. The age criteria required for a spouse is reduced to 55 years for this reason.

If you are looking to avail such credits, ensure that a lender offers similar policies, so you do not face any settlement issues in the future.

Also, consider the loan amount offered by lenders when you avail such credits. As it is a secured form of credit, it comes with a larger loan amount.

However, a loan against property can be a better credit option if you want to avail credits by keeping your property as mortgage. NBFCs like Bajaj Finserv offer multiple features along with such loans that make it a beneficial choice.

Bajaj Finserv also provide pre-approved offers on loans against property to ensure that the process to avail them is hassle-free and less time-consuming. These pre-approved offers are extended to a plethora of other financial products and services including business loans, personal loans, home loans and more.

Consider the things mentioned above to enjoy reverse mortgage benefits. Opt for such credits from a reputed lender to make the most out of it. You can also apply for a loan against property to enjoy additional benefits, which reverse mortgage don’t offer.