When you become old and do not work, your monthly income stops. How to manage your monthly expenses, medical expenses? These questions are common for all senior citizens. In order to get regular incomes, people save money in various forms of investments like retirement plans, provident funds, fixed deposits etc. There is one more option available for senior citizens – Reverse Mortgaging.
What is Reverse Mortgage
Reverse Mortgage is a financial product that enables senior citizens (60 years plus) to mortgage their property with a financial institution and get regular cash every month for a agreed period. The aim is to make illiquid assets like real estate liquid by generating regular cash in flow from the asset. Reverse Mortgage unlocks the liquidity potential of this asset.
Reverse Mortgage Process – How it works?
The property owner surrenders the title of the property to a financial institution. The financial institution does not pay the entire amount to the owner upfront. It pays a fixed sum each month for a specific period of time. The monthly pay out depends on the valuation of the property, tenure of the agreement and rate of return.
As per the agreement, the property owner stays in the house along with his spouse for their life time. This gives an opportunity to the property owner to stay in the house and get monthly cash. The property is transferred to the financial institution rather than his heirs.
In case the property owner survives the agreement period, the financial institution has to bear the risk. After expiry of the agreement period, the financial institution stops the monthly payment to the property owner.
Reverse Mortgage in India
Reverse Mortgage in India is at a very early phase. It will take few more years for this concept to become popular in India. Some of the leading banks are offering this service.
Ishita Sharma has rich experience in the field of investments. She writes articles on investments and also reviews investment related articles. For more information on various investments visit – http://www.investmentbazar.com
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