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PRESENTED BY:
SAKSHI THAKRAL AKANKSHA SACHDEVA VISHAL GUPTA MAMTA NIVEDITA SHEENAM

INTRODUCTION
Reverse Mortgage is basically a type of mortgage in which a homeowner can borrow against the value of his or her home. No repayment of the mortgage (principal or interest) is required until the borrower dies or his home is sold.

PROCESS OF REVERSE MORTGAGE

HOW THE LOAN IS PAID BACK

No payment during the life of the borrowers. Thus, loan balance rises overtime.
The value of the loan grows at a much faster rate than the loan balance. After it is decided to sell of the house , the loan becomes due and thus the ownership is passed to the estate or will to the beneficiaries. The beneficiaries now own the home and thus the loan is to be paid off. If the home is sold the reverse mortgage lender is paid off and the beneficiaries keep the remaining equity of the home.

What is a loan to value ratio?

Loan to value ratio means the percentage of loan that you will get for the value of the property that you pledge. The typical rate loan to value ratio is 60 per cent. So, for e.g., if you pledge a property worth Rs 60 lakh (Rs 6 million), then the loan amount that you can get is Rs 36 lakh (Rs 3.6 million).

What happens after the death of one or both of the spouses?

If one of the spouses dies, the other can still continue living in the house. If both die, the bank will give their heirs two options -- settle the overall outstanding loan and retain the house, or the bank will sell the house, use the proceeds to settle the outstanding loan and give the rest to the heirs

 Any house owner over 60 years of age is eligible for a reverse mortgage. You never make a payment, never give up title to your home, and can never be forced to move The maximum loan is up to 60 per cent of the value of the residential property. The maximum period of property mortgage is 15 years with a bank or HFC (Housing Finance Company). The borrower can opt for a monthly, quarterly, annual or lump sum payments at any point, as per his discretion. The revaluation of the property has to be undertaken by the bank or HFC once every 5 years. The amount received through reverse mortgage is considered as loan and not income; hence the same will not attract any tax liability.

Contd
Reverse mortgage rates can be fixed or floating and hence will vary according to market conditions depending on the interest rate regime chosen by the borrower The loan amount cant be used for any business purpose or trading. It can only be used for personal expenses, house maintenance and repairs.

Borrower has the option of repaying the loan amount along with the interest accumulated if he/she chooses to do so at any time during the tenor without any prepayment penalty.
Todays HECM interest rate is 4.5%

Most of the elderly are homeowners. For many, especially those with low incomes, homeowner equity constitutes a major part of their net worth. Most of them built that equity during their working lives, in part by paying down their mortgages. As their incomes decline in their later years, many would like to consume their equity rather than leave it to heirs who don't need it. Without reverse mortgages, however, the only way to do that is to sell the house and live elsewhere. Reverse mortgages allow elderly homeowners to consume some or all of the equity in their homes without having to moveever.

 Basic

everyday living expenses

Property taxes & homeowners insurance Deferred home maintenance Medical expenses Maintain financial independence & control

No Risk of Default No Downside Tax Free No Restrictions Flexible Payment Options Easy Pre-Qualifications Home Ownership Guaranteed Place to Live Federally Insured

No monthly mortgage payments

Comparatively expensive Rising debt, falling equity: Limitations on age/property qualifications: Beware if You are Eligible for Low-Income Assistance: Reconsider if You Are Planning to Move in the Near Term: Evaluate if You are Willing to Reduce Your Heirs Inheritance

SBI
The loan can be avail through monthly or quarterly payments. The loan amount will be 90% of the property value If last survivor dies or chooses to sell the home then the loan will be due and payable. Borrowers should submit their annual life certificates by November of every year. The candidate has to be a senior citizen, above 60 years, of India. Married couples are also eligible as joint borrowers but one of them has to be a senior citizen of the country. The life of the home property should go beyond 20 years. The mortgage property must be free from encumbrance. The loan carries a fixed interest rate of 10.75% p.a. subject to reset at the end of every five years along with revaluation of security and re-adjustment of loan instalments.

Punjab National Bank

PNB is the first Public Sector Bank to come out with a Reverse Mortgage concept based product for senior citizen titled "PNB Baghban". age of 60 years & above. The qualifying amount of loan will depend on the realisable value of residential property. 10.5 % p.a. (fixed) subject to re-set clause of five years The loan shall be extended

Dewan Housing Finance Ltd. (DHFL)

DHFL brings you this unique Reverse Mortgage Loan under the name 'Saksham'. Be 60 years and older and retired from active work life The rate of interest is 12% per annum linked to retail prime lending rate.

National Housing Bank

RML is to be extended by Primary Lending Institutions (PLIs) viz. Scheduled Banks and Housing Finance Companies (HFCs) registered with NHB or any institutions as may be notified by Government of India. Should be Senior Citizen of India above 60 years of age. Married couples will be eligibl. The residual life of the property should be at least 20 years. The amount of loan will depend on market value of residential property, The maximum loan disbursement tenure should not exceed 20 years. The interest rate to be charged on the RML

Indian Bank
Senior Citizens above 60 years, including retired staff of our Bank. Married couples will be eligible as joint borrowers for financial assistance provided one of them is above 60 years of age. The residual life of the property should be more than 20 years. Maximum loan amount : Rs.40 lakh. 61% on the realizable value of property. Property (offered as security) to be insured at borrowers cost with Bank clause against fire, flood, earthquake, riot and other risks, which are normally covered by insurance companies. Revaluation of property to be done once in 3 years and interest rate will be reset once in 5 years. The amount of loan will depend on market value of the residential property as assessed by the Bank. The realizable value of the property is calculated at 10% less than the Market value.

Central Bank of India

Central Bank of India in association with Star Union Dai-chi Life launch a new product REVERSE MORTGAGE. Senior citizens above the age of 60 It will pass on 80 per cent of the investment earning to the customers every year as bonus. Features of the product include regular income within a month of joining the scheme, a choice of monthly, quarterly, half-yearly and yearly annuity payments and also an option of lumpsum payment of 25 per cent of the loan amount, subject to a maximum Rs 15 lakh. There is an interest rate of 9.5 per cent

Terms and conditions

o Reverse Mortgage Loans (RMLs) are to be extended by Primary Lending
Institutions (PLIs) viz. Scheduled Banks and Housing Finance Companies (HFCs) with NHB. registered

Eligible Borrowers:
Should be Senior Citizen of India above 60 years of age. Married couples will be eligible as joint borrowers for financial assistance. Should be the owner of a self- acquired, self occupied residential property (house or flat) located in India , with clear title indicating the prospective borrower's ownership of the property and it should be free from any encumbrances. The residual life of the property should be at least 20 years. The prospective borrowers should use that residential property as permanent primary residence

o Determination of Eligible Amount of Loan

The amount of loan will depend on market value of residential property, as assessed by the PLI, age of borrower and prevalent interest rate. Age / Loan as proportion of Assessed Value of Property 60 65 / 40% 66 70 / 50% 71 75 / 55% Above 75 / 60% The Plies will need to re-value the property mortgaged to them at intervals that may be fixed by the PLI depending upon the location of the property, its physical state etc.

o Nature of Payment
Periodic payments (monthly, quarterly, half-yearly, annual) to be decided mutually between the PLI and the borrower. Lump-sum payments may be made conditional and limited to special requirements such as medical exigencies, home improvement, maintenance, up-gradation, renovation, extension of residential property etc.

o Eligible End use of funds

For uses associated with home improvement, maintenance/insurance of residential property.

Medical, emergency expenditure for maintenance of family For supplementing pension/other income Repayment of an existing loan taken for the residential property to be mortgaged Use of RML for speculative, trading and business purposes shall not be permitted. oPeriod of Loan: Maximum 15 years.

oInterest Rate The interest rate (including the periodic rest) to be charged on
the RML to be extended to the borrower's) may be fixed by PLI in the usual manner based on risk perception, the loan pricing policy etc. and specified to the prospective borrowers.

oSecurity
The RML shall be secured by way of mortgage of residential property, in a suitable form, in favor of PLI. Commercial property will not be eligible for RML.

o Loan Disbursement by Lender to Borrower

The loan will be extended as regular monthly, quarterly, halfyearly or annual periodic cash advances or as a line of credit to be drawn down in time of need. In case the residential property is already mortgaged to any other institution, the PLI may, at its discretion, consider permitting use of part proceeds of RML to prepay/repay the existing housing loan. The PLI will have the discretion to decide the mode of payment of the loan including fixation of loan tenor, depending on the state and market value of the property, age of the borrower and other factors.

oTitle Indemnity/Insurance
The PLI shall obtain legal opinion for ensuring clarity on the title of the residential property. The PLI shall also Endeavour to obtain indemnity on title related risks, as and when such indemnity products are available in India.

o FORECLOSURE
o

The loan shall be liable for foreclosure due to occurrence of the following events If the borrower has not stayed in the property for a continuous period of one year. If the borrower's fails to pay property taxes or maintain and repair the residential property. If borrower's declare himself/herself/themselves bankrupt. If borrower's declare himself/herself/themselves bankrupt.

POPULARITY OF SCHEME
LACK OF AWARENESS INDIAN BANKING INDUSTRY CAPS THE AVAILABLE LOAN AMOUNT TO Rs50 LAKH AND LIMIT THE LOAN PERIOD TO TENURE OF 15 YEARS . THE PRODUCT IS STILL EVOLVING AND MAY TAKE A NEW DIMENSIONS DEPENDING ON HOW THE BANKS WISH

TWO BIG BANKS EXIT REVERSE MORTGAGE BUSINESS BANK OF AMERICA

WELLS FARGO

CENTRAL BANK TARGETING OTHER EXPAND REVERSE SCHEME

OF INDIA CITIES TO MORTGAGE