The idea of reverse mortgages in a youthful country like India, whose average age of citizens is about 26 years, is not at all exciting. In the UK, it is known as lifetime mortgage. It is a home credit intended for the older people by transferring their permanent asset—their house or in banking terminology, their equity in any domicile—property into a channel of income without liquidating the equity in case of any necessity. The deal involves two parties, the borrower—the elderly person, and the creditor—any bank or housing finance body. The security to the lender is the house property by borrower. In return, the borrower acquires a chunk or periodic payments extended till the borrower's life span that can be spent by the person as per wishes his save speculative reasons.
The house-holder need not reimburse the loan throughout his or her existence. In case of his or her death or leaving the house on a permanent basis, the principal with interest is paid back by selling the equity or the house. If the accumulated interest and loan together are more than the worth of the pledged asset, the mortgage loan is restricted to the worth of the home equity and the creditor is at a loss. Any surplus total by the sale of the property is accordingly passed on to the borrower if he or she leaves permanently or his or her inheritors in case of death. If there is an additional income and accumulation of amount to repay the loan, the borrower can liberate his or her property earlier than the maturity period and can also proceed for another reverse mortgage if necessary on the same asset. Reverse mortgage is suitably labeled because the payment flow is `inverted.' A lender pays to the borrower instead of the other way, as is the case usually. Distinct from a usual mortgage, the borrower can stay in his mortgaged residence till the end of his life without any apprehension of expulsion even after the term closes. |
