A reverse mortgage loan (RML) is a secured loan offered only to senior citizens. Similar to other mortgage loans, RML is sanctioned against an asset, which is the borrower’s house in this case. However, unlike other loans, RML provides funds either in a lump sum or at regular intervals to the customer, which is also known as reverse EMIs.
Some of the reverse mortgage benefits include –
- Borrowers don’t have to repay the loan, unlike conventional ones.
- The repayment is not due even after the tenor expires.
- Repayment of the loan is only due when the last surviving borrower passes away.
- Loan amount can be used for any purpose without any restriction.
A reverse mortgage is used by older homeowners to receive income from the equity in their home to be repaid when they no longer occupy the home.
However, there are some limitations to reverse mortgage loans –
- Lenders will seize the property when the loan becomes due. However, they will first provide the option of repayment to the legal heirs of the borrowers.
- LTV of reverse mortgage loans is also low.
- Homeowners will not rent their house out.
- Payment of property tax is mandatory.
- Availing home insurance is also mandatory when taking such loans.
Must Read : Reverse Mortgage Benefits
Hence, opting for alternates like a loan against property can be more beneficial. With regular EMI payments, borrowers will not risk their house from getting seized. The LTV on such loans is also high; the funds availed can also be used for any financial objectives without any restriction.
Loan Against Collateral 