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What is Reverse Mortgage?

25 March 2009, Wednesday

Reverse Mortgage in India still at an infancy stage. The reverse mortgage came into existence in the UK during the crash of 1929. Having evolved genetically from the developed countries and mainly the USA, reverse mortgage is a scheme formulated to benefit the senior citizens the most. Although applicable for the younger people also, 'reverse mortgage loan products for senior citizens' is the basic that every bank of financial institution follows.

Reverse mortgage information that will help you in understanding the concept of reverse mortgage loan is listed below.

  • Definition Of Reverse Mortgage: Reverse mortgage is a Home Loan product designed for the senior citizens by converting their fixed asset - their home or in banking terms their equity in any house property into an income channel without having to liquidify your equity in case of any requirement.
  • The Dealing Parties: Reverse mortgage loan involves two parties, the borrower - the senior citizen and the lender - any bank or housing finance institution.
  • Security for the Lender: The borrower pledge their home property to a lender.
  • Payment of the Loan to the Borrower: In return of the house property pledged, the borrower gets a lump sum amount or periodic payments spread over the borrower's lifetime that can be utilized by the borrower (senior citizen) as per needs and not for speculative purposes.
  • Repayment of Reverse Mortgage Loan: The homeowner and now the borrower will not be required to repay the loan during his lifetime. On his death or leaving the house permanently, the loan along with the accumulated interest is repaid through the sale of the property pledged.
  • Home Value Falling Short: In case the accumulated interest and loan amount is larger than the value of the mortgaged property, the mortgage loan is capped at the value of the home equity only and the lender is the party at loss.
  • Home Value in Excess: Any excess amount by the sale of the property is duly remitted to the borrower incase of permanent leaving of the house or his heirs in case of the death of the borrower.
  • Freeing the property from reverse mortgage: In case you get an additional income and accumulate an amount to repay your loan, you can free your property in midterm and can also apply for re-reverse mortgage if required on the same property.

In the usual mortgage loan, the borrower begins with a large loan and lower equity in his house. In reverse mortgage however, the borrower has a very high equity in his house and a non-recourse loan secured by the home property. In the usual mortgage system, as the regular mortgage payments are made the outstanding loan decreases and the house equity increases. Reverse is the case in reverse mortgage, the loan amount increases with time and the home equity decreases with time.

The reverse mortgage pros and cons must be measured carefully before subscribing to it. Since, the bulk of the savings for the average Indian are typically locked away in a house or other property at the time of retirement, and in case of requirement it cannot be encashed except by selling the home or moving out. This is where reverse mortgage comes as an answer.

Taking the usual mortgage loans in lieu of your home as a security will not be feasible in the age above 50 as the repayment of the loan is not feasible. The Banks And Financial Institutions also won't be of any help in case of no income source. This is where the house property proves as an asset and brings in reverse mortgage that allows you to be the home owner as long as you live. Home ownership is an area most Indians are sensitive about and reverse mortgage entitles you your house throughout your remaining life According to demographic projections, reverse mortgage loan products could be a hit among the metros and also in areas like Kerala, Tamil Nadu, Goa and Chandigarh in India. With hardly any old age social security schemes and financial helplines, reverse mortgages have a potential market. Loans are available in the form of reverse mortgage without any income criteria at an age where normal loans are not available. Reverse mortgage for senior citizens is a social assurance post-retirement.

The major reverse mortgage lenders in India or the banks and financial institutions providing reverse mortgage in India include :

  • National Housing Bank (NHB)
  • Dewan Housing Finance Limited (DHFL)
  • State Bank of India (SBI)
  • Punjab National Bank (PNB)
  • Indian Bank
  • Central Bank of India

Reverse mortgage is a way of getting the benefits of your home equity by retaining the home ownership and also without having to make any repayments. The senior citizens in India will definitely find reverse mortgage a solution for their financial needs after retirement and help them in regaining their feeling of independence.

Add Your Comment
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CJG
I have a HDFC SLIC Unit Linked Endowment II Plus Policy. Rs.50000/- is the annual premium and this Policy is for 30 years. Do you think I stand to gain in the near future and if so, what would be my tentative benefit.
Suresh Pal
I want updates on Insurance & Ulip Comparisons and their profitability
Suresh Pal
I have invested Rs 30000/= in ICICI Prulife stage pensionad two years back. ICICI is saying that I should switch to their ULIP or traditional policy plz advice and provide related comparisons.
u p gupta
want to pay premium on line
V.Jagadeeswar
let me kwow the sourced invest of ULIPs Vs produced returns on ULIPs of total market.
shekhar verma
I want to invest 40000 in ULIPs plan for 5 years so please suggest best plan for me and how many i will get return afrer 5 year.
dr m krishnakumar
should i surrounder my HDFC unitlinked young star -growth fund policy ,as it is more than 4 years old
P.S.Satyanarayana
Good article
K S P RAO PATNAIK
Taken Life time superior and paid premium for 3 years @ 1500 per month and disconnected, if i will reiumbuse the same what is my present value.
kaidjauhar
I WANT TO INVEST 200000 IN LIC WEALTH PLUS PLAN AFTER EIGHT YEAR APPROXIMATLY HOW MANY I WILL GET RETURN. AND THIS PLAN IS GOOD OR NOT
sharanu
This seems to be very outdated article , which is FULLY in favor of ULIPs , there isn't any entry load in MFs anymore and no switch charges as mentioned here.ULIPs charged are round 30-40% in the 1st year and never less than 6% after that while MFs the charges would never exceed 2.25% which is now in the form of expense ratio and the investor can directly negotiate agent's commission as per his wish.the portfolio disclosure withheld by the ULIPs is clear indication that they don't want to reveal the actual profits. ULIPs are neither a investment nor a insurance , they r just to make agents n insurance companies richer.insurance should be bought for insurance needs. Sad to see such website promoting ULIPs
ujjal hazarika
very good...make me a subscriber of indian money
jathan_amma@yahoo.com
thanks
naem khan
please suggest in 10 year plan @ premium amount Rs 36000 p.a what will be the approximate mature amount.
PRAKASH PATIL
ulip
m.sasikumar
I want to know more about unit linked insurance policies.
Edwin Faria
Every so called financial expert advises keeping investments seperate from insurance - take a term plan and invest in mutual funds. This is a really good & informative article which clearly shows that for those looking at time horizons of 5 years and above, a ULIP could well be the best option.
deepak
One of the best article on ULIPS i have ever seen.
mahesh
Please suggest me any ULIP plan for myself
ekta patel
please go through the same
R
Thanks u
ARUN.A.S.
Sir, now at present what is the groeth and financial and capital growth of SBI-LIC,ULIP Bonds and ING-Vysya ULIP Bonds,, can you please be inform me, Ihave 1--1 ULIP Policy in the above said SBI-LIC and ING-VYSYA, Both plan for longterm atleasst for 10 years,.
venkat Durgamwar
i have invested in HDFC unit link plan (Younger champion),how much % growth i can expect after 10 years.
srinivas
need help on the plan
M.G.Mhaskey
I hope my investments help me when I retire, I am investing Rs.2400.00 per month in HDFC SLIC II Ulip Policy, but their charges i.e. fund allocation charges etc. are much and sometimes I think I shouldn't have believed in Sar Utha ke Jiyo
TEENA JAMES
GREAT KNOWLEDGE GAINED IN SIMPLE LANGUAGE IN LESS TIME
RAKESHSONI
IT IS VERYEASY TO LERAN SOMETHING
nagabhushanam.k
its very easy to understand and really worthy to take a bright decision
lavina
My total monthly income is Rs.33446.00 net p.m. after deduction of Profident Fund. I have housing loan with monthly deduction of 21500/- per month, I have also taken insurance which I invest Rs.15000/- p.a. Could u advise do I have to pay any tax on my salary, even after monthly deduction of Rs.21500/- for housing loan
ravi
worth reading
karthick
why do the ulip's charges are not reduced yet now when they will implement it
patit patnaik
Can you please tell me which ULIP or SIP is best to invest now and gives good returns.Looking for 5-10 yrs plan both for one time investment and systematic investment plan
raj singh
Due to hike in share market I want to surrinder my ICICI Prudential life stage plocity I paid Rs50000/- for five years 10000/- pm. now i am getting Rs.67000/- pl advise me is it the right time to surinder
p.r.arunkumar
Good & knowledgeable. I would like to know more about global markets, can u describe it pls.
M R Beriwal
You have ignored UTI Mutual Fund's ULIP Scheme even though it is the oldest product and I think you must include it in your comparitive table which will reveal that it is the best product at most competetive charges available. Please let me know if you differ with my finding and I shall be only too happy to prove my point.
vicky
plz, study carefully.
Govind Pant
I have invessted in ULIPS schemes of SBILife in which medium risk is involved.may I request you to enlighten me on these schemes of Sbilife.
milind Padalkar
i have taken Reliance Money Gurantee Life ins plan, is it a good policy as far as future is concerned.
Anil Srivastava
You people are wonderful people. No article can be rated above your published articles. I wonder how you people manage the way of presentation of articles. Hats off to your IndiaMoney.com Research Team.
Varun Dalal
Dear Team, please guide me on below, I had taken a ulip plan of ICICI prudential 4 years back, paying premium of 75000 pa regularly having a insurance cover of 10 lacs, but the current fund value is 1.33 lacs only which is les then 50% of my invesments, i would not like to invest any further amount in this ulip from now, If so, will it affect my fund value and insurance, i mean to say i will not withdraw the same also, will my fund value be the same or it will increase
NIRANJAN SINGH
BEST RETURN ON 10,000/PA PREMIUM FOR 10-20 YEARS
pankaj jadhav
Giveme more details about ULIPs
P.k yadav
I want to take a ulip plan.
Atul Rajkotia
Thanks
Sundeep lal
worthfull and helpfull arcticle...!
Muthukrishnan
Your article clearly explained all my doubts on ULIP. This is really an eyeopener for investors. Thank you for your excellent service provided to readers.
krishna kant singh
it helps to enhance your knowledge about investment. excellent. thanks
REKHA TIWARY
good article, simple & clear. I request you to give information about insurance pension, gratuity & superannuation scheme Thanx.
ANAND RAI
very good ane detail information about ulip. this article help me to understand so many things about ulipi would like to request you to continue such ulip related issue and please gives us information how to use sucessesfully switching facility to ensured max. return. ANAND RAI
Nilesh Malkhandi
Good article ,helpful weapon for selling ULIP ....Many many thanks.
surinder
hi
parimalarengan
it,s very simply to understand the ULIP concepts . thank u & wishing this type mails. once again thank u
jyothi priya
good article, read for further information
K.V.Ramana Murty
It is a worthfull article. do not miss it to read.
K.V.Ramana Murty
worthfull article
MR. DANDASI
STREET NO.26, QR.NO. 3/C, SECTOR-1, BHILAI, DISTT.- DURG, {C.G.}, PIN 490001
BRAJ KISHOR SINGH ,WOCKHARDT
good sharing
sachin
Pls give the links for pdf of ULIP information
sanjay saha
what is your openion about Tata AIG's United ujjwal bhawyshya(banca product)?
krishnalal
new players of insurance companies plans and charges not mentioned, where they charge much lesser than any gaints in the market
vijendra singh
Dear sir i can't explain in my words these articles are so wonderfull.plz update me regulrly........... i want ur all article...........
M R Beriwal
Could you also include the ULIP of UTI Mutual fund in your study as UTI ULIP Is also a major and the earliest player
Uddhav N Bhosale
Good
ritu
which company is safe and give good results and is ppf better then ULIP.
lajwanti gandhi
very good article.
Ramesh kumar
i am lookin for ULIP plan to suite my daughter after 10 yeasr please advice
Basant Kumar
this is really nice.......hope more to come like this
sreekanth.singaraju
it is a very good information to all.
sanjay saha
good plz,continue.
danish kagzi
which company would be best for ULIP plans?
sonia D souza
Very good artical. subscribe me daily
S SHEKHAR
continue providing info
amit
asds
anil raina
i have taken Profit Plus last year for Rs.10,000 as well as market plus for Rs.10,000/- but i have paid for this year for the either of the two.What loss i have to bear if i do not pay anymore.Secondly,i have taken fture plus growth for Rs.10,000/- x 3 nos. in the year 2003,2004 respectively.Shall i keep it wit for more time or shall i cash it.Pls suggest
pankaj verma
Good and informative article. It improves my knowledge
shilpa
which is better option in terms of ULIP or Mutual Funds
vandana
worthy article, pl. provide more informationon about different ULIPS for comparison
Shahzad Ahmad
ULIP policies provied full freedom aftar three years
Nicky
Hi, I'm interested in taking a ULIP policy with premium amt of 15-20 anually. Pls suggest me the best one in the industry Thanks
sandeep samal
In long run point of view I think ULIP is good one. What is your view ?
Asha Suwanti kachhap
I have take Smart Advantage Plan from Kotak Life Insurance in April 2008. Monthly prenium we are paying Rs 1000/-in every month. This ulip-linked plan is good or not, please give me advice.
krishna chaitanya
I think Kotak smart Advantage plan is good one for long term plan...charges are very less in this plan and returns are very high....
svgopikrishna
nice one
sairameshkumar
knowledgeble
Pankaj Rai
Excellent presentation . I think LIC Profit plus plan is good.
ekta goyal
Great article. wonderful comparison of ULIPs and Mutual funds on various parameters
Aniruddha Palshikar
This is very good article.Not only for insured people but also for Insurance Advisors.
Surbhi
Very gud article to enhance one's knowledge and helps in comparing the stability,security,growth of the investment in ULIPs with othe financial tools like Mutual funds
KAILASH CHANDRA SUNDARKA
HDFC STANDARD LIFE is openly looting the people by charging 65%-91% as premium allocation charges. I dont know how the IRDA has turned a blind eye to this. Poor investors.........
ketan natu
very informative and worth reading . I would like to have a article on the perfect asset allocation for an individual investor .
Bhuvanesh
Excellent approach to educate people and removing misconception about ULIP.Being from Financial/ Insurance Sector I will say that ULIP if worked out systematically it is Zero cost Insurance with returns. It can be replaced for all conventional product for Child Education/ Marriage/ Saving/ Retirement/ Pension Plan etc. and works out cheaper than Term plan in long run with insurance cover till 100 years and we have authenticated proven combination of the same for some of the ULIP policy of TATA AIG
Bhuvanesh
Excellent approach to educate people and removing misconception about ULIP.Being from Financial/ Insurance Sector I will say that ULIP if worked out systematically it is Zero cost Insurance with returns. It can be replaced for all conventional product for Child Education/ Marriage/ Saving/ Retirement/ Pension Plan etc. and works out cheaper than Term plan in long run with insurance cover till 100 years and we have authenticated proven combination of the same for some of the ULIP policy of TATA AIG
Vibhu Tandon
LIC is good
Gunjan
good article. however i think you have taken the STCG as 10% instead of 15%.
anthony rodrigues
it is good article
sagar patil
very informative and updated
R.K.Sharma
thanks for your advice, I have taken LIC Profit Plus Plan. I thnk that you have prensented a very good comparision of all existing plans.
sumitha
informative article.goodwork
Asit Ranjan
Worth Reading,Clears most of the doubts.
bajirao
Dear Sir/Madam, Can you tel me which which ULIP product is best. ie. good returns.
Abhijit
Good and informative article. It improves my knowledge.
sanjay singh
i want work with you
abhishek bhatnagar
It's worth reading!!
D.Manivannan
good, educative article.
mahendra sharma
sir/mam, i am paid only single half year premium after that i am not in rajasthan plz tell me whats the prosiser of strat agen or sarender the same .premium Rs 5000 case whit in three yers
Ram Niwas Gitoria
Very knowledgable article for general public
shashi
reg surrender
Hemant
Reading worthy

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