Reverse mortgage loans are a unique financial product, which is beginning to gain popularity in India. Launched in 2007, these lines of credit are different from all the other available loan options. These unique features of such loans are listed below in detail.
However, despite these unique benefits offered by such reverse mortgage loans, there are a few disadvantages associated with these loans. A vital issue that might come up is that of its repayment in the event of a borrower outliving its repayment tenor.
Furthermore, these loans often lead to the loss of a property for an heir since financial institutions hypothecate such properties to clear a borrower’s debt. To avoid such issues, borrowers can opt for loans against property, secured lines of credit.
However, unlike reverse mortgage, LAP allows a borrower to repay his/her loan slowly over time and thereby reduces any chance of losing property by defaulting on this credit.
- Regular cash inflow: A financial product, primarily meant for equity-rich individuals, these loans offer its borrowers a steady cash inflow. Borrowers can choose this frequency of financial influx, making it especially convenient for its applicants who are usually without any income, such as senior citizens.
- No risk of default: A significant reverse mortgage benefit is that financial institutions use the collateral for loan repayment, thereby eliminating any risk of default.
- High loan sum: A borrower has his/her property evaluated and, accordingly, a loan sum is fixed by financial institutions. This usually leads to a substantial loan quantum, disbursed as regular payments to its borrowers.
However, despite these unique benefits offered by such reverse mortgage loans, there are a few disadvantages associated with these loans. A vital issue that might come up is that of its repayment in the event of a borrower outliving its repayment tenor.
Furthermore, these loans often lead to the loss of a property for an heir since financial institutions hypothecate such properties to clear a borrower’s debt. To avoid such issues, borrowers can opt for loans against property, secured lines of credit.
However, unlike reverse mortgage, LAP allows a borrower to repay his/her loan slowly over time and thereby reduces any chance of losing property by defaulting on this credit.
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