Reverse mortgage benefits

As mentioned in an English daily, house rich and cash poor is a predicament that many elderly face in India today. Hence, regular source of income of such persons needs augmentation to enable them to live a reasonable comfortable life. It is reported that the National Housing Bank (NHB) is working out a scheme, under which senior citizens can avail loans against their high priced houses with no obligation to return the loans during their lifetime. They would also be permitted to live in the houses mortgaged till either of the spouses is alive.

How the scheme works?
In the scheme, being conceptualised, a senior citizen of 62 years or more, who owns a house, can be given loan up to a fixed amount worked out on the percentage basis of the market value of the house owned and given on mortgage. They can, if they so desire, opt for receiving the amount in monthly instalments also. In such a case, the amount admissible will be spread over in 15 years in the form of annuity namely as monthly or annual payments. Tentatively, as worked out in an English daily, the scheme can be implemented in the following manner in regard to a house of the value of Rs 1crore.

The loan amounts and the monthly instalments are expected to vary with the age of the owner because the chances of older borrowers to survive for longer periods are less than the borrowers, who are in lesser age group. This will lead to a reduction of the interest portion of the loan. (See table)

Full story at http://www.financialexpress.com/fe_full_story.php?content_id=142742