SBI Reverse Mortgage Loan: Senior citizens having a self-acquired or self-occupied home can get an additional source of income through SBI Reverse Mortgage Loan Facility. According to the SBI website, the reverse mortgage facility may be useful for senior citizens who do not have an adequate source of income to support themselves.
Under SBI Reverse Mortgage Loan, the bank pays the borrower/borrowers (in case of a living spouse) against the mortgage of his/their residential property. The bank says that the borrower is not expected to service the loan during his lifetime. However, the borrower has the option to pay back the loan.
SBI Reverse Mortgage Loan may be ideal for senior citizens who do not have sufficient income to support themselves as they do not have to service the loan. However, before applying for this loan, there are a few points that senior citizens should know:
- Banks offering Reverse Mortgage Loans do periodic property valuation, generally after every 5 years.
- Rising inflation is not accounted for as the monthly amount that you can receive is fixed.
- Banks generally consider a margin of 15-20% on property valuation while approving the reverse mortgage loan. For example, if the valuation of the property is Rs 50 lakh, then only Rs 40 would be sanctioned as a reverse mortgage loan.
- The loan amount includes the interest component as well. This means the amount that you will actually get would be equal to the sanctioned loan minus the interest on the loan.
- After the death of the borrower, the bank sells the property. It returns the balance to the legal heirs of the borrower if the property is sold at a higher price. Alternatively, the legal heirs can keep the house by repaying the loan.
In the case of a single borrower, resident Indians aged 60 years can apply for the Reverse Mortgage Loan. In case of the joint borrowers, the age of the spouse should be more than 58 years.
Loan tenure and amount
The minimum amount that can be availed through the Reverse Mortgage Loan facility is Rs 3 lakh and the maximum is Rs 1 crore. The tenure of the loan is 10-15 years, depending on the age of the borrowers.
Interest Rate and Fees
SBI charges 0.50% of the loan amount as a processing fee subject to a minimum of Rs 2000 and a maximum of Rs 20,000 plus applicable taxes. Post sanction, the borrower has to pay stamp duty payable to the loan agreement and property insurance premium. The current rate of interest on the SBI Reverse Mortgage Loan is 10.95%.
Senior citizens can prepay their reverse mortgage loan without attracting penalties.
Senior citizens reverse mortgage loan borrowers can opt for monthly, quarterly, half-yearly, yearly or lump sum payout.