Page 23 - Seniorstoday June 2024 Issue

mental peace and security of a roof over the residence proofs, income tax filings, bank
head.
Broadly, the bank will have the property
inspected and evaluated. Based on the
valuation, the bank will decide on the
maximum amount that one can receive
as a reverse mortgage facility. Banks may
offer a facility in the range of 60% to 80%
of the determined value and the maximum
amount offered may be in the range of
Rs.1 crore to Rs. 2 crores. Some aggressive
private banks may have higher caps on the
amount. The tenor usually is 15 to 20 years
depending on the age of the borrower. The
amount sanctioned, after deducting the
estimated amount of interest, is divided
into monthly instalments and will be paid
over the tenor of the loan. The interest rate
tends to be higher as compared to a housing
loan. Typically, the bank will charge on the
basis of RBI Repo rate + spread + margin.
These will vary from time to time, the
reason why some banks may offer a fixed
or a floating rate, depending on the RBI
Repo rate and spread. If a housing loan
is available at 9%, for a reverse mortgage
the bank may charge in the range of 11%
to 12 %. Generally, the banks prefer to pay
monthly payments over the tenor period,
and discourage lump sum payments to
protect the senior citizens from imprudent
use or loss or fraudsters. To avail the
facility, the usual documents like age and
SENIORS TODAY | ISSUE #60 | JUNE 2024
statements, agreement, promissory notes,
etc. will be involved. These are procedural
and have to be complied with.
To illustrate, if the eligibility amount is Rs.
1 core and the estimated interest over the
tenor is Rs. 50 lakhs (it will include interest
on interest component as well, since no
repayments are required during the tenor)
and the tenor is 15 years, the bank will
disburse a monthly amount of Rs. 27,778
(Rs. 50 lakhs /180 months). After the tenor,
the senior citizen can continue to live in
his home for as long as he or his spouse is
alive, without repaying Rs. 1 crore or the
interest accruing on it. On the demise of the
borrower, the heirs will have an option to
pay the outstanding amount and retake/
sell the property or the bank can sell the
property and pay the balance amount to the
heirs. In case the senior citizen or her/his
spouse passes during the tenor, a similar
step for repayment will be followed by the
bank to recover its dues.
Any senior citizen facing difficulties
managing with the existing monthly
incomes, will do well to look at reverse
mortgage as a practical option. After all, the
purpose of life is to live well and happy in
their lifetime and no one can take his or her
property to the world of Lord Yama. Why
reverse the sunset moments?
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