A reverse home mortgage is unique loans, which are offered only to senior citizens. The procured funds provide regular financial aid to the borrowers throughout the entire tenor, which usually stretches over several years. Despite being a popular option across the globe, it has not received a warm welcome in India since its introduction in 2007. This lack of popularity can be traced to a lack of knowledge on the side of borrowers, which often severely discourages them from opting for it.
Interestingly, reverse home mortgage loans offer multiple benefits that are unavailable in any other financial product. While these benefits are discussed below in detail, potential borrowers should also note its few shortcomings, mentioned in the latter section.
- Easy financing: A significant advantage of availing such a loan product is that it offers regular financing to its borrowers. Primarily meant for individuals who are equity-rich but do not have access to easy cash, these loans help senior citizens with a steady source of financing after their retirement.
- No end-use restriction: Along with regular financial aid for its borrowers, these loans also offer the advantage of having no end-use restriction. As a result, borrowers availing a reverse mortgage loan can use their available financing for any necessary expenditure. This is a vital advantage since most senior citizens do not have access to regular income even though they have different financial necessities, which they need to meet for survival.
- Choice of tenor: Similar to a loan against property and other secure loan options, reverse mortgages also offer an extended tenor for its repayment. While these loans are generally granted in India for a minimum tenor of 10 years, borrowers can also choose 20 years for their loan repayment duration. This feature is especially helpful for senior citizens, who can decide to use his/her property for repayment after their demise.
- Comfortable repayment: Borrowers of reverse mortgage loans have the option to repay their debt when its tenor is over, which is after 10 or 20 years. In the event of being financially broke, borrowers can allow their financial institution to use their collateral for its repayment. This feature enables senior citizens to spend their twilight years without having to worry about finances and their repayments.
- No risk of default: While there are many ways to ensure that a borrower does not default on his/her loan against property, senior citizens opting for reverse mortgages need not concern themselves over it. When the tenor of these loans is over, financial institutions use their collateral to clear existing debts.
- Minimal requirements: These loans have minimum eligibility requirements since any individual beyond 60 years of age can easily apply for these loans. Potential borrowers should also note, they must be residents of the hypothecated property for at least 20 years if they are to use it as collateral.
Despite these numerous benefits, borrowers looking to opt for reverse mortgage loans should also note that these lines of credit have a few shortcomings. These include loss of property in case a borrower is unable to repay his/her loan amount when its tenor is completed. Additionally, this can also lead to litigation issues since, in such incidents, heirs lose ownership of the mortgaged property.
Contrastingly, borrowers can also opt for home mortgage loans, which offer various benefits, including lump-sum financing, no end-use restriction, etc. Borrowers should compare different loan products from the various financial institutions, before applying for it to make the best possible choice.
Borrowers opting for mortgage loans can also avail the advantage of pre-approved offers that make loan applications fast and easy. Such offers are provided on many financial products like loan against property, home loans, etc. You can easily check your pre-approved offer by providing your details, including name and phone number.
Along with ease of application, financial institutions also offer online calculators, which can be used to check the total repayment amount, as well as its EMIs. Unlike in the case of a reverse mortgage, individuals are also offered tax benefits on these LAPs. Consequently, potential borrowers of mortgage loans should also check how they can avail tax benefits on their LAP since these can reduce financial strain.