Reverse mortgage vs loan against property: Which is the best option for leveraging home equity?
Reverse mortgages are better suited for senior citizens who need a regular source of income, while Loan Against Property is a secured loan and can fund a wide range of requirements.
Are you looking to access additional funds by leveraging your home equity? Reverse Mortgage and Loan Against Property (LAP) are two standard options to harness your home and get additional cash.
However, these are two different options, so it is essential to understand the features and differences between these two financial products to help you make an informed decision.
A reverse mortgage is a financial product meant explicitly for senior homeowners who are 60 years of age or older. Here, the senior citizens receive tax-free cash from the bank based on the home's value, interest rates and other aspects.
It is just the opposite of home loans. In the case of home loans, the ownership initially remains with the bank and is gradually transferred to the borrower as they repay the loan. Here, in a reverse mortgage, the ownership is with the senior citizen, and the ownership is gradually transferred to the bank at the end of the tenure.
There are certain aspects of reverse mortgages that seniors should keep in mind before considering reverse mortgages.
«Seniors have a large chunk of money locked in real estate. Reverse mortgages can help individuals to unlock these assets and get a steady source of income from their homes. Here, you are gradually selling your house. A reverse mortgage also comes with 'No Negative Equity Guarantee' which means that if the amount you owe to the lender is more than the sale price of the house, you won't have to pay the difference out of your pocket. For example, if the value of your home falls over time, and it is
Read more on livemint.com
