It’s time for a very serious discussion. Where would you get money from after you retire? This has to be some kind of joke. You are just 30. Why worry about retirement now? Retirement is not as far away as you think. Before you know you have retired. Are you the only one thinking retirement is far away? You are not alone. Crores of Indians do not care about their retirement. India does not have a good Government social security scheme for retirement, unlike the USA and other developed countries. Who would look after so many of our fellow citizens when they retire? Cost of food and other essentials is rising every year. Hospitalization and medical treatment for senior citizens, is very expensive. Are Indians sitting on a ticking time bomb?
Reverse mortgage is the opposite of a home loan. In a home loan you borrow money from the bank, to buy your home. You repay the home loan in installments called EMI’s (Equated monthly installments), within a fixed time (tenure of the home loan).
In a reverse mortgage, you pledge your home with the bank. In exchange, the bank gives you money as a lump sum or in monthly, quarterly or annual installments. This is just like drawing a monthly salary. You need to be a senior citizen (above 60 years), to avail reverse mortgage. The title of your home needs to be clear and marketable. Your home must be free from mortgages. You have to live in the house, which you have pledged with the bank. The tenure of the reverse mortgage could be 10 years to as high as 20 years. You can pledge your home and get 60% to 90% of its value, in reverse mortgage. You do not have to pay any tax on the money you receive from the bank, through reverse mortgage. Your property must have a residual life of at least 20 years. Here’s the good part… You and spouse can continue to reside at the home you have pledged, as long as you and spouse are alive. It gets even better…You do not have to repay the amount you have borrowed from the bank. After you and spouse, your legal heirs (children) pay back the borrowed amount to the bank, with interest.
Life expectancy in India, has gone up by 5 years in the last decade. It has gone up from 62.3 years to 67.3 years for males. For females it has gone up from 63.9 years to 69.6 years. This is something we need to be proud of. But there’s a problem. Cost of medical treatment especially for senior citizens, has shot up. With senior citizens living long after retirement and with no regular income, how would they provide for themselves? Senior citizens owning residential property need to consider reverse mortgage.
Indians love their children and take good care of them. Should not these children support their parents in their elderly years? Indians especially our elders, take great pride in not depending on their children to provide for them, in their elderly years. They would rather starve, than go with a begging bowl to their children. Many senior citizens do not live with their children. With nuclear families on the rise, senior citizens prefer staying apart to avoid family conflicts. Children could also be residing abroad. What can senior citizens do if their pension is not enough and they need money in a hurry? Depend on their children for money? Reverse Mortgage has got to be the answer.
Another reason why Indians need to take reverse mortgage seriously? Many Indians do take care of their parents in their elderly years. They give them money, even though parents do not ask. They understand the difficulties of not having a regular income. There are also a number of Indians, aping the west. The YOLO (You Only Live Once) generation, lives the fast life. While aping the West is very good…a few vices of the West have crept in. A few of our fellow citizens abandon their parents, forcing them to fend for themselves in their elderly years. With the number of such citizens on the rise, the Government introduced Reverse Mortgage, in the year 2007. Now elderly Indian citizens can live with dignity availing reverse mortgage.
Well…they can avail reverse mortgage. On the death of the senior citizen, their children can inherit the house, only if they pay back the reverse mortgage (borrowed amount + interest). The bank would give the first right to children to pay back the dues and claim the house. If they refuse to do so, the bank would auction the property and collect its due. The remaining amount would be given to the children. Senior citizens can live with dignity and do not have to borrow money from friends and family, as long as they are alive. Senior citizens can also reside on the property which is pledged, as long as they live. With senior citizens even living up to 80 years, money problems are taken care of.
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