Sunday, September 15, 2019

REVERSE MORTGAGE


    REVERSE MORTGAGE

GYAN KI BAAT
    PLAYLIST : PERSONAL FINANCE ON YOU TUBE CHANNEL SHASHI AGGARWAL
    INTRODUCTION
1.       THE REVERSE MORTGAGE LOAN WAS INTRODUCED ON 2007 TO IMPROVE THE LIFE OF HOUSE OWNING SENIOR CITIZEN
2.       RML IS A LOAN THAT ENABLES THEM TO MEET THEIR DAY TO DAY EXPENSES PERTAINING TO FOOD, MEDICINE AND REPAIR OF THE HOUSE.
3.       MINIMUM AGE OF AVAILING THE RML IS 60 YEARS IRRESPECTIVE OF THE GENDER DIFFERENCE
4.       IF A COUPLE SEEKS JOINT LOAN THE AGE LIMIT FOR THE SPOUSE IS 55 YEARS OR ABOVE

    FEATURES
1.       AVAILABLE ONLY TO HOME MAKERS AGED 60 YEARS OR ABOVE
2.       THE AMOUNT RECEIVED IS NON TAXABLE
3.       THE MAXIMUM LOAN AMOUNT IS CAPPED AT RS ONE CRORE
4.       THE TENOR VARIES FROM 10 TO 20 YEARS
5.       APPLICANT CAN CHOOSE THE INSTALMENT FREQUENTLY AND ALSO OPT FOR OCCASIONAL LUMP SUM PAYMENT IN EMERGENCY SUCH AS MEDICAL EXIGENCY
6.       PAYMENT MAY BE INCREASED IN BETWEEN THE TENURE AS A RESULT OF APPRECIATION IN ORIGINAL PROPERTY VALUE
7.       THE OWNER CAN CONTINUE TO STAY TILL THEIR LAST BREATH OR UN TILL THEY DECIDE TO MOVE OUT PERMANENTLY.

    OBJECTIVES OF REVERSE MORTGAGE
1.       TRADITIONAL JOINT FAMILIES HAVE GIVEN WAY TO NUCLEAR ONE
2.       COMMON TO SEE CHILDREN SETTLED ELSEWHERE WHILE THERE ELDERS PARENTS CHOSE TO HOLD ON TO THEIR ROOTS.
3.       LONELINESS IS INCREASING AMONG SENIOR CITIZEN AND MANY OF THEM OFTEN END UP FACING CRISIS OWNING TO A LACK OF PROPER FINANCIAL RETIREMENT SUPPORT
4.       KEEPING IN MIND, SENIOR CITIZEN WHO ARE HOME MAKERS BUT DO DON’T HAVE ANY OTHER SOURCE OF INCOME.THE GOVT INTRODUCED THE SYSTEM OF REVERSE MORTGAGE.
5.       DUE TO ADVANCEMENT IN MEDICAL SCIENCE LIFE EXPECTANCY IN INDIA HAS INCREASED SUBSTANTIALLY
6.       ACCORDING TO MINISTRY OF SOCIAL JUSTICE AND EMPOWERMENT,THE NUMBER OF SENIOR CITIZEN IN INDIA ( ABOVE 60 YEARS ) IS PROJECTED TO RISE TO 14.3 CRORE IN 2021 AND 17.3 CRORE IN 2026.
    REVERSE MORTGAGE
    TWO TYPES OF RML
1.       REGULAR RML: A HOME OWNER ABOVE 60 YEARS OF AGE IS ELIGIBLE FOR REVERSE MORTGAGE. ALLOW HIM TO TURN THE EQUITY IN HIS HOME INTO LUMP SUM OR PERIODIC PAYMENTS
2.       REVERSE MORTGAGE LOAN ENABLED ANNUITY( RMLeL):
  1. PURCHASE THE ANNUITY PLAN AND PAYS OUT THE PRINCIPAL AMOUNT TO THE INSURANCE COMPANY.
  2. BANK BECOMES THE MASTER POLICY HOLDER AND THE BORROWER ANNUITANT
  3. THE INSURANCE COMPANY SCHEDULES THE REPAYMENT PLAN AND SET THE ANNUITY BENEFITS THAT WILL BE PAID AT REGULAR INTERVAL TO THE ANNUITANTS.
  4. THE INSURANCE COMPANY RETURNS THE BONUS IN CASE ROI FROM INVESTMENT OF PURCHASE PRICE IS OVER 6% PERCENT
  • ELIGIBILITY
1.       THE APPLICANT MUST HAVE HIS /HER OWNED PURCHASED HOUSE AS RML CANNOT BE SECURED AGAINST ANCESTOR’S PROPERTY
2.       BANKS AND FINANCIAL INSTITUTION ASSESS THE VALUE OF THE PROPERTY BUT MINIMUM RESIDENTIAL LIFE SHOULD NOT BE LESS THAN 20 YEARS
3.       PRESENTLY RS 50,000 IS THE CEILING LIMIT IN MONTHLY PAYMENT PLAN AND 50% OF THE LOAN AMOUNT IS THE MAXIMUM LUMP SUM LIMIT
4.       RML CAN BE RAISED BY UPTO 90% OF THE PROPERTY AND GENERALLY LOAN IS GRANTED FOR 50% TO 60% OF THE PROPERTY VALUE

5.       THE BORROWER SHOULD BE  THE OWNER AND SELF OCCUPYING THE MORTGAGED PROPERTY AS PRIMARY RESIDENCE
6.       VACANT HOMES AND INVESTOR PROPERTIES ARE NOT ELIGIBLE
7.       ACTIVITIES LIKE HOUSE REPAIRING,PAYMENT OF TAX AND INSURANCE ARE THE SOLE RESPONSIBILITIES OF THE APPLICANT
8.       REGULAR CHARGES AND DOCUMENTATION FEE AND PROCESSING FEE WOULD BE DEDUCTED
9.       RBI HAS FIXED A MINIMUM LIMIT OF 3 LACS AND MAXIMUM LIMIT OF ONE CRORE FOR THIS PRODUCT
10.   FIVE YEARS THE LENDER WILL APPRAISE THE PROPERTY AND CAN REASSESS THE REPAYMENT AMOUNT ACCORDING TO THE PRESENT MARKET VALUE
    FACTORS
1.       BORROWER’S AGE
2.       PROPERTY VALUE
3.       PREVALENT INTEREST RATES
4.       CHOSEN PLAN
5.       OLDER THE BORROWER ,HIGHER THE AMOUNT IS AVAILABLE
6.       THE TENURE OF RML RANGES FROM 10-20 YEARS
7.       ACCORDING TO NATIONAL HOSUING BANK SCHEME THE MAXIMUM TENURE OF THE LOAN IS 15 YEARS
8.       WHEN THE BORROWER LIVES LONGER THAN 15 YEARS ,PERIODIC PAYMENTS WILL NOT BE MADE BY THE LENDER BUT THE BORROWER CAN CONTINUE TO OCCUPY THE PROPERTY
9.       REVERSE MORTGAGE LOAN
10.   THE LOAN DOES NOT BECOME PAYABLE DURING THE STIPULATED TENURE UNLESS THE APPLICANT DIES OR CHOSE TO SELL THE HOUSE OR MOVES INTO ANOTHER PROPERTY
11.   IN CASE THE PROPERTY OWNER DIES THE LEGAL HEIRS CAN CHOOSE TO REPAY THE LOAN AND CLAIM THE PROPERTY
12.   IN CASE, SALE OF THE PROPERTY EARNS MORE THAN THE LOAN AMOUNT, THE EXCESS IS HANDED OVER TO LEGAL HEIR. A TAX ON CAPITAL GAIN IS APPLICABLE
13.   BUT IF THE PROPERTY IS SOLD AT LOW VALUE THEN BANK WILL BEAR THE LOSS

    CHALLENGES
    IT IS UNPOPULAR
    REASONS:-
1.       INDIANS TEND TO TREAT OWNED PROPERTY AS AN IMPORTANT FAMILY ASSETS
2.       INTENDED TO BE INHERITED BY THE NEXT GENERATION AND WOULD BE LIQUIDATED AS LAST RESORT
3.       ELDERLY TEND TO HOLD A PLACE OF HIGH SIGNIFICANCE IN THE INDIAN CULTURE
4.       PROPERTY OWNING SENIOR CITIZEN ARE USUALLY ASSURED OF CARE AND SUPPORT IN THEIR SUNSET DAYS
5.       TRADITIONAL MINDSET OF THE PEOPLE



    NOT FULLY UNDERSTOOD BY THE CUSTOMERS
    COMPLEX PRODUCT
    LOW AWARENESS
    CONCLUSION
1.       WITH DUE DILIGENCE ,THE BENEFITS OF A REVERSE MORTGAGE LOAN WILL OUTWEIGH THE RISK INVOLVED
2.       UNIQUE PRODUCT
3.       PROVIDES FINANCIAL FREEDOM TO SENIOR CITIZEN



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