Every government employee or working individual aims to spend a dignified life after retirement. If you’re also nearing your retirement, you must be looking for ways to fund your retirement period without being dependent on anyone.

A reverse mortgage is a helpful and effective way of funding your expenses during the retirement period. It also allows pensioners to get a regular income.

What is a reverse mortgage?
A reverse mortgage is a unique plan for people who are above 60 years old and own a residential property. This exclusive offer helps you maintain the ownership of your home. In a reverse mortgage plan, instead of the homeowner paying EMIs to the property lender, the lender is the one who makes payments in installments to the homeowner.

How does reverse mortgage work?
As the name indicates, a reverse mortgage is the opposite of a mortgage loan. At the start of a mortgage loan, the bank is the sole owner of a property, and with every EMI payment, the equity of that property starts transferring to the name of the borrower.

However, in reverse mortgage, the borrower has the whole equity of the home. The bank will grant a loan against the property which is divided into equal parts. It makes payments to the borrower in installments. One need not pay back this loan in their lifetime. If the borrower passes away, the heir of that property has to repay the loan, failing which the lender has the right to sell the property to recover the borrowed amount.

What are the features of a reverse mortgage?

• A maximum of 60% of the property’s value can be availed as a reverse mortgage, depending on the current market values.
• The minimum duration for paying back the loan differs from bank to bank.
• Some valid payout options are yearly, half-yearly, monthly, quarterly, etc.
• One has to draft a proper will to avail of a reverse mortgage.

What are the advantages of a reverse mortgage?

• It is a regular income source for retirees.
• The installments received under the reverse mortgage are tax-free as this sum is not considered as a source of income.
• The borrower has the opportunity to repay the loan within the set tenure without any additional charges.
• One can live in the same house even after the tenure expires until the borrower or co-borrower passes away.

What are the disadvantages of a reverse mortgage?

• Availing reverse mortgage means that you and your heir will lose the ownership of the house when the tenure expires.
• One can only avail of 60% of the property’s price as a reverse mortgage.
• The processing fee to get a reverse mortgage is much higher than mortgage loans.
• You will use your home’s equity as a regular source of income, which means that you will only have a few assets to pass down to your heirs.

Who are eligible for a reverse mortgage?
You need to meet the following criteria to be eligible for a reverse mortgage:

• The property must be self-acquired by the person availing of a reverse mortgage. It should not be a gifted or inherited property.
• A person must be more than 60 years old to avail of a reverse mortgage. In case you’re applying for a joint reverse mortgage with your spouse, you must be eligible as per the rules set by the government.
• You can only avail of a reverse mortgage against a self-occupied property.
• The house should be within the country’s boundaries, and it should have clear titles.
• There should be no existing liabilities on that particular house.