Reverse mortgage

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Avinash Patil

Recently after Finance Minister of India had allowed reverse mortgage in the last year did public sector banks like Canara Bank come up with reverse mortgage product i.e Canara Jeevan

Reverse Mortgage is type of mortgage where homeowners can borrow money against the value of their home. No repayment of the mortgage (principal or interest) is required of the borrower(s) until the borrowers are deceased or the home is sold. After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan.

Often, the lender will require that there can be no other liens against the home. Any existing liens must be paid-off through the proceeds of the reverse mortgage.

Reverse mortgage is a method of receiving income that people can tap into for their retirement. The advantage of a reverse mortgage is that the borrower's credit is not relevant, and is often unchecked, since the borrower does not need to make any payments. As the home serves as collateral, it must be sold in order to repay the mortgage when borrower dies (in some cases, the heirs have the option of repaying the mortgage without selling the home). These types of mortgages have large origination costs relative to other types of mortgages. These costs become part of the initial loan balance and accrue interest. Senior citizen borrowers with good credit should carefully analyze the options of a more traditional mortgage, such as a home equity loan, against a reverse mortgage.