Reverse Mortgage – some specific queries?

POSTED BY Jassi ON April 20, 2012 4:07 pm COMMENTS (3)

Hi Members,
I have read Manish’s blog on Reverse mortgage and also read the NHB guidelines on the same – http://www.nhb.org.in/RML/guidelines.php

I have some queries on this topic and would like to learn from the members’ experiences/suggestions.

My parents enquired about Reverse Mortgage loan from Oriental bank. The manager explained some rules but also admitted
that not many people in India have taken loan for this and he is also not very sure of all points.

My mom is 56 years old and my Dad is 62 years old. They have an apartment (more than 15 years old) in Siliguri and we stay in Bangalore.
The apartment is in my Mom’s name.

1> The Bank manager informed that, for them to get this mortgage loan, my mom should also be above 60 years. However, reading the rules
as in the link above, it states that since this is like a joint loan, even if one spouse is above 60, they are eligible for the loan.
Is my understanding correct?

2> My parents keep visiting us in Bangalore and sometimes stay for like an year. In the guidelines, its mentioned that the borrowers should not vacate their house for
more than a year. 
However, say a situation arises that this my parents take this loan. After 5 years, they feel they want to move permanently with us.
In this case, do my parents have to sell the apartment, and settle the dues with the bank? Or will the bank sell the home, take their dues and give the rest of money to my parents.
If my parents have to sell the same, then they are not too keen to go for this loan. Reasons can be ill-health during that period, too many complications in finding buyer, selling home,
settling loan etc etc…

I know renting now and selling later is also an option. But my parents want to keep the flexibility of staying in their apartment whenever they want , as of now.

Any advise, suggestions and thought are welcome. Is our thought process ok?

Rgds,
Jassi

3 replies on this article “Reverse Mortgage – some specific queries?”

  1. Jassi says:

    ok Ashal and Manish. I get your thoughts.

    We are three brothers. My thinking was if parents can use this apartment (RM, rent, or sale of it )to their cause only. I was not thinking in terms Internal RM between us (bros) and parents.

    Amongst RM, rent and sale – RM looked to be the best option as parents would have their house and also get some money on it. But ya, involving bank and all are extra complexities.

    Maybe rental and Later sale can be looked upon.

    Anyways, I also wish that during our retirement times, my house can be used for RM :):):)

    Thanks Ashal and Manish.

    Rgds,
    Jassi

  2. Dear Jassi, as the property is in the name of mother who is 56Y old, RM is not possible. Also the age of property itself ‘ll be a question in itself if down the line after 4Y, your parents (actually your mother) decide to go for RM.

    Personally I’m more comfortable with the idea of personal RM, between you & your parents. or better, you purchase that apartment now outright from your mother. Invest the sell proceeds in investments for both of parents.

    Thanks

    Ashal

  3. Hi Jassi

    1. The bank official is correct for the first point , The joint loan can happen only when the house is also on the name of both the parents , when he house is on Mothers name , then the loan rules will be considering only her age and in this case , she is below 60 .

    2. Understand the structure of the RML , its reverse of home loan . IN home loan , you get LUMPSUM and pay EMI , in RML ,you want installments (EMI) and for that you have to give a big lumpsum (just like you have pension plans , where you pay a big amount and then get pension income) , But as you are not giving any big amount right now , you are actually giving your house , but not now , but in future when both the parents are not there. So here at any point of time, there is a liability you have which oyu have to pay to bank , so if after 5 yrs, they want to stop this RML , you will have to pay a big sum to them.

    I dont see why you should even do this . Its a internal thing .. you guys anyways can buy a house at some place and pay EMI for it , your parents want to get EMI;s and are ready to give away the house .

    So dont you only pay them a monthly sum , just like EMI’s .. this is the best thing in your case, dont involve bank in this .

    Manish

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