What is a Reverse Mortgage and How Does it Work?

Reverse Mortgage loan in India also known as HECM (home equity conservation mortgage) is a secured loan over a residential property. The reverse mortgage loans do not require monthly mortgage payment and typically promoted to the homeowner who is 62 or older. The loan enables the applicant to encumbered value of the patrimony. Generally, senior citizens use this as their supplement retirement income but they still have to pay taxes and insurance on the property. 

How can one get a Reverse Mortgage Loan?

Step1: The applicant mortgages his property to the financial institutions such as banks so that he can capitalize on his residence in his later years. This offers them the benefits like staying in the property till they are alive. The scheme provides a regular revenue stream to enjoy a meaningful and healthy retirement.

Step2: After the application is processed, the borrower receives the payment from the financial institution. Various types in which claimant can receive payment are given below-

>EMI (Equated Monthly Installments)

>Lump-sum

>Line of credit

>Term payments

During the time period of the reverse mortgage, the possession of the property is with the aspirant.

Step3: If the loan applicant dies, then the home is given to legitimate heirs and they will be responsible to pay off the mortgage loan. If the loan is not paid on time due to any reason, then the financial institution has the power to auction the property and recover the dues.
Additional Read: What is Reverse Mortgage and how Does it work