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Monday, April 20, 2009
REVERSE MORTGAGE LOAN
The Reverse Mortgage loan, which has been introduced in India, appears to be attracting middle class Senior Citizens, who have inadequate income to support themselves. I have come across some senior citizens to sell out their residential property for their survival and end up in untold miseries. This loan scheme seems to give some relief to such people in future.
REVERSE MORTGAGE LOAN
This is a new loan scheme launched in some of the nationalized banks. (STATE BANK OF INDIA AND PUNJAB NATIONAL BANK HAVE INTRODUCED THIS LOAN) This scheme is formulated for the benefit of the aged above 60 years living in their own residential property with inadequate income to support themselves. The loan can be availed of by way of either (i) periodic installments or (ii) lump sum amount. This loan and interest is not required to be repaid during the life time of the borrower. This loan will be recovered on the demise of the last surviving borrower or foreclosure in case the borrower leaves the property permanently by the sale of the property if the legal heirs do not repay the loan with interest.
Objective of the scheme:
To provide a source of additional income for senior citizens of India who own self-acquired and self-occupied house property in India.
No. of borrowers
Single or jointly with spouse in case of a living spouse.
Age of first borrower
Above 58 years.
Borrower should be staying at self-acquired and self owned house/flat against which loan is being raised, as his permanent primary residence.
Mobile/Telephone/Credit card bills/Certificate from the housing society where the borrower is staying/Affidavit made before the executive magistrate may be accepted as proof of residence.
Borrowers will be required to inform the Bank when they cease to use this residence as their permanent residence.
Title of the Property:
Borrowers should have a clear and transferable title in their names. Title verification and search report for a period of 30 years will be required to be obtained from the Bank’s empanelled advocate at borrower’s cost.
Title of the property and number of borrowers:
Case – Title in single name and loan availed jointly with spouse. Title holder should make a Registered Will in favour of the other spouse. The Will should confirm that this is the last Will and that it supercedes all earlier Wills, if any. The borrower to undertake that no fresh Will shall be made during the currency of the loan.
The property should be free from any encumbrances. However in case of property purchased by availing Home Loan from SBI and mortgaged to SBI, it will be considered for RML, subject to closure of the Home Loan account out of the proceeds of RML.
Residual Life of property:
Should be at least 20 years in case of single borrower and 25 years in case of spouse being below 60 years of age. Certificate from empanelled engineer/architect will be required to be obtained for this purpose, in addition to valuation of property.
The RML shall be secured by way of equitable mortgage of residential property.
Age of the younger of the borrowers between 58 and upto 68 years: 15 year’s age of the younger of the borrowers above 68 years: 10 years OR till death of the borrower(s), whichever is earlier.
By credit to an SB account in the joint names of the borrowers operated by E or S
Periodicity of availing loan:
1. Monthly/Quarterly payments
2. Lump sum payment.
Quantum of loan:
The loan amount would be 90% of the value of property. Loan amount would include interest till maturity. The loan installments payable to the borrower(s) would be as under for a loan amount of Rs.1 lac (at interest rate of 10.75% p.a.):
(years) 10 11 12 13 14 15
(Rs.) 468 399 343 297 258 225
(Rs.) 1,423 1,215 1,045 905 787 687
(Rs.) 36,022 32,525 29,368 26,517 23,944 21,619
The maximum loan amount is proposed to be kept at Rs.1 crore (monthly payment Rs.22,500/- for 15years) and minimum Rs.3 lacs (monthly payment Rs.675/- for 15 years). Example of arriving at the monthly installments:
Property value : Rs.10 lacs
Qualifying loan amount
(90% of property value) : Rs.9 lacs
Tenor : 15 years
Monthly instalment : Rs.225 x 9 = Rs.2,025/-.
Purpose of Loan:
Supplementing income, any personal expenses, house repairs, etc. Loan amount should not be used for speculative, trading and business purposes.
2. This loan can be prepaid any time during the tenure without any prepayment penalty. Subsequent revaluation of the property will be done once in 5 years and revision of periodic/lump sum amount will be made on such basis.
3. Interest at a fixed rate of 10.75% p.a. for public and at 9.75% p.a. (Concessional interest rate of 1% below the card rate applicable to public) to SBI Pensioners will be charged.
4. The loan will be made available in the form of Non-Renewable over draft facility. No Cheque Book/Debit Card will be linked to this account.
Courtesy: SBI Elders Voice