Reverse Equity Mortgage

Reverse equity mortgage may prove to be the perfect solution for the senior citizens after retirement. After retirement, the main cause of concern is the income source. The regular source of income stops. In this context, reverse equity mortgage serves as a source of income as well as a loan.
The loan amount may be used for various purposes. With the help of the money, one may undergo medical treatment, repair ones house, use the, money for meeting everyday expenses, go on a long holiday or use the money at ones own will.

Requisites of a reverse equity mortgage:
Since reverse equity mortgage is meant for senior citizens, it does not mean that all retired individuals can avail of the benefits of a reverse equity mortgage.

There are certain parameters, which need to be fulfilled if one intends to opt for a reverse mortgage loan.

The retired individual should be 62 years or more than that.
Should own a house.
Should be residing in the house at least for a minimum period of 6 months. These are the basic requirements of availing a reverse equity mortgage.
Features of a reverse equity mortgage:

Even after mortgaging the house, the individual does not have to fear of losing the house.
The full repayment of the loan is made ones the house is sold, transferred or the house is no longer used as the primary residence.
One is not required to make payments on a monthly basis.
The proceeds of the reverse equity mortgage are not taxable and hence a borrower is not required to pay income tax. The money is not regarded as income.


It may be mentioned here that if the house gets sold for an amount greater than the loan amount, the heir takes the excess. On the contrary, if the amount for, which the house is sold, is less than the loan amount, the loan insurance pays the shortfall.
A thorough research and study is needed:
There are many financial institutions, which offer reverse equity mortgage loans. But the lenders may not always have good intentions. Studies have revealed that there are many lenders who tend to exploit the retired individuals and take advantage of their helplessness and age. It is of utmost importance to read carefully between the lines prior to taking the plunge. The terms and conditions in particular need to be carefully understood.

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Last Updated on : 24th August 2013