Is a Reverse Mortgage Good?

I left the business sector in 2006, and my only source of support for my wife and I was my provident fund. Even though she was retired, my wife just had her bank money. So, I was thinking about getting a reverse mortgage on my three-bedroom house to increase my financial flexibility. I therefore wished to know is a reverse mortgage good or bad. I completely repaid my home loan while in service, and I completely owned my property. I was debt-free, but due to the lack of a secondary source of income I was unable to rent out my home. I will tell you what course of action I chose.

Is a reverse mortgage a good thing?

Reverse mortgage loans are available from a select group of banks, including the National Housing Bank (NHB), State Bank of India (SBI), Punjab National Bank (PNB), Central Bank of India, Indian Bank, Andhra Bank, Dewan Housing Finance Limited (DHFL), LlC Housing Finance, Corporation Bank, and Canara Bank.

Yes, a reverse mortgage is a good idea. A reverse mortgage will provide you with some liquidity for unforeseen needs, such as a medical emergency.

The following points should be remembered to understand is a reverse mortgage a good idea:

• A reverse mortgage loan is available to anyone 60 years of age or older with a spouse who is 58 years of age or older.

• If your spouse is older than 55, she is eligible to be a co-borrower.

• The most money available is Rs 1 crore.

• The age of the borrower and the current interest rate determine the loan amount.

• Ten years is the minimum and twenty years is the maximum term.

• You must be the owner of the property, not a tenant, and you must live there most of the time.

• A reverse mortgage is not permissible for a business property.

• The building should have a minimum residual life of 20 years.

• Processing charges, such as stamp duty, property insurance, GST fees, etc., could be assessed by banks.

• Your reverse mortgage loan can be repaid without incurring penalties.

• Every five years, a property valuation is performed.

• You must ask the bank for permission if you want to renovate your house.

• Finally, you can choose from payout options such monthly, quarterly, half-yearly, yearly, or lump sum.

The following documentation must be provided to the bank in order to apply for a reverse mortgage loan.

• Evidence of identity

• Evidence of one's home or address

• Property documents

• Account statements over the previous six months for all of your bank accounts

• Statement of loans during the previous year (if any)

• Whatever other paperwork the bank requests

• Additionally, a reverse mortgage loan will assist your tax situation.

• Your income is not subject to taxation.

• Any refurbishment costs may be deducted from income when calculating expenses.

• Loan repayment will not be regarded as a tax deduction.

However, there are several significant disadvantages to a reverse mortgage.

• There is no mechanism to increase the fixed monthly sum to account for growing inflation.

• On property appraisal, a 15–20% margin is taken into account. Therefore, if the property is worth Rs 1 crore, you will get a loan for Rs 80. But there's a problem. The interest component is included in the loan amount because there will be loan repayment.

• In other words, if you take out an 80 lakh rupee loan with an interest rate of 8.5% over a 20 year period, the interest component will be 45 lakh rupees, and you would only get back 35 lakh rupees. Also, keep in mind that this will be paid out monthly. The payoff will be 50% of the loan amount or Rs 15 lakh, whichever is higher if you want to withdraw it all at once. This option is also contingent upon you or your spouse experiencing a medical emergency.

• The property will be sold upon the borrower's passing, and if the selling price exceeds the loan total, the excess will be given back to the borrower's legitimate heirs.

• The loan may also be repaid by the legal heirs.

You can think about selling the house and relocating to a smaller one in light of these difficulties. You might invest the surplus in a fixed deposit or a systematic withdrawal plan after paying capital gains tax. You will receive interest income on your deposit in addition to having your cash intact.

Now you know is a reverse mortgage good or bad.