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Reverse Mortgage Loan for Senior Citizen

 

Senior Citizen can now get paid for living in their house. They will be able to enjoy a steady income by mortgage self-occupied property ( commercial property in not eligible) to banks or other eligible Financial Institution and can stay in it throughout lifetime.

The Loan can be extended by the scheduled Banks / Housing Finance Companies to Senior Citizens against owned and self occupied houses for a maximum period of 15 Years. The Loan can be given to couple even if one of them is below 60 years.

If borrower wished to repay the Loan, he can do so and keep the house without paying any penalty. In the event of death of the husband who may be the owner of the property, the wife who may be co borrower but not co-owner will receive restricted cash flows.

The Bank will not evict the wife, but will alter the cash flow.

The amount of Loan will depend on market value of residential property assessed.

Loan eligible ( approx.) of assessed value of Property

Age of the Borrower

Approx. % of Loan on the value of the Property

60 – 65 years

40%

66 – 70 years

50%

71 – 75 years

55%

Above 75 years

60%

Even after one partner dies the other one will continue to enjoy the right to live in the house.

In return for the Loan, the Senior Citizens are required to Mortgage the property to the lender, who can make up lump sum, monthly or quarterly payments to the borrowers during their lifetime.

Once the borrower dies or decide to leave the house immediately, the lender recovers the Loan amount plus Interest by selling the property.

However, the borrower or their heirs will have the option to repay or prepay the loan with accumulated Interest and retain the property. Borrower can also ask for lump sum amount.

This will be restricted to special requirements such as Medical emergencies, home improvements, extension / renovation / up gradation of property & repayment of existing Loan.

Earnings received from reverse mortgage would not be treated as Income. Similarly, reverse mortgage would not amount to “Transfer” under the provision of Income Tax Act. Therefore, money received as a Loan will not attract any liability in account of Capital Gains. As income from the scheme has been transferred under the provision of Sec. 10  of the Income Tax Act, the sum received from the scheme will be exempted from Income Tax.

 
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