Retirement planning: What is a reverse mortgage and how does it work? MintGenie explains
Retirement planning has become a crucial consideration for individuals in the ever-changing Indian landscape. With demographic shifts and an ageing population, strategic retirement planning holds even greater importance. To assist these individuals, the State Bank of India (SBI) offers a scheme for reverse mortgage loans so that they can sustain themselves financially. Through this scheme, the bank offers payments to borrowers in exchange for the mortgage of their residential property.
It is particularly beneficial for those senior citizens who require a consistent income source since the loan amount is not required to be repaid until the borrower either sells their home or moves out.
A reverse mortgage is a loan available to homeowners aged 62 or older, allowing them to convert part of the equity in their homes into cash. Unlike traditional mortgages, where homeowners pay the lender, in a reverse mortgage, the lender pays the homeowner. The beauty of this system lies in its flexibility and the fact that the loan does not have to be repaid until the homeowner moves out or passes away.
A reverse mortgage loan is specially designed to help senior citizens avail of periodical payments from a lender against the mortgage of their house, all while retaining ownership and living in the house. However, individual banks have specific requirements that borrowers must meet to apply for this loan.
Here are the eligibility criteria that need to be fulfilled to qualify for this loan:
These and other eligibility criteria, such as the condition of the property and the maximum loan amount, are determined by lenders on a case-by-case basis.
Low processing fees: The processing fee for reverse mortgages is 0.50% of the loan amount.
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