As per the recent reports, LAP recorded the highest growth in 90+ balance level delinquency rates YoY in 2020. The enormous growth is fueled by various aspects like a boost in real estate demand, rising disposable income, etc.
Reverse mortgage loan involves converting some of the home equity value into cash and helping individuals to acquire a substantial amount as a regular stream of income. Such home-based loans come as a great financing option for senior citizens as they do not need to repay the loan amount during their lifetime.
How does reverse mortgage loan work?
In order to utilise the reverse mortgage benefits, individuals above 60 years of age are required to meet certain parameters as mentioned in the loan’s norms. One can obtain funds through various ways, including, opting for a lump sum, on a monthly payment basis, or choosing a line of credit option.
Also, one of the key advantages of this particular loan variant is that the loan balance does not become due until one decides to sell the house, fails to pay taxes and insurance, or passes away.
Here are some uses of reverse mortgage loans:
- One of the ways to effectively repay your existing loan is to apply for a reverse loan against property, which enables one to consolidate other dues. However, the conversion of your traditional mortgage to this one requires proper planning and staying prepared for the market downturn.
- It also comes as a great funding source for retired individuals, especially those lacking a proper pension plan.
Additionally, for senior citizens, the loan works perfectly as they get a monthly source of income after their retirement. All they need to do is pledge their house as collateral and obtain a sizable fund in different ways. As a part of the LAP loan, reverse mortgage loan also have certain requirements from the borrowers. Even though the requirements usually depend on the financial institution you are opting for, the basics remain pretty much the same.
Reverse mortgage loan against property eligibility criteria
There are certain loan obligations you may come across if you are not aware of all the eligibility parameters beforehand. In order to complete the reverse loan against property application process smoothly, it is necessary to know the following eligibility criteria.
- The loan applicant has to be 62 years or older to utilise Reverse mortgage loan benefits.
- Even though the required equity amount varies from one financial institution to another, individuals should at least have enough equity in their house.
- Before applying, it is necessary to go through a financial assessment to check if it is the right time or situation for the borrower to avail the loan.
- The home should be the borrower’s primary residence and in a decent condition.
Apart from these, financial institutions can also have some other requirements that you should discuss before availing a reverse mortgage loan. Although, with so many monthly schemes and pre-approved offers going through the process has become relatively easier. These offers are available on several financial products like home loans, loan against property, etc. You can easily check your pre-approved offer by submitting your name and contact number to get better deals.
Even though reverse mortgage loan seems like an ideal retirement tool, there are certain aspects to it, one should be aware of. Since the responsibility of repaying the loan amount falls to the borrowers’ heirs, handling all the accrued interest can become difficult for them. Therefore, make sure to consider all factors before you take a loan against property.