All about Non Refundable Loan

 

All about NON REFUNDABLE LOAN

It is also known as  Reverse Mortgage Loan (RML) , in funny word it is the loan that you NEVER have to pay back during your life cycle . Looks crazy … every one will be attracted to such loan which one will  never have to pay back during his life time , is not it???  And  in fact it is true..

Reverse Mortgage Loan (RML) is a Scheme developed by the National Housing Bank (NHB) to help Senior Citizens (persons above the age of 60 years) to avail of periodical payments from a lender bank against the mortgage of his/her house while remaining the owner and occupant of the house. The borrowers are not required to service the loan during their lifetime and, therefore, do not make monthly repayments of principal and interest to the lender.

Why it is called Reverse Mortgage Loan :

In normal mortgage loan , borrower has to pay back to lender bank periodically in the form of EMI . But in Reverse Mortgage Loan , it is lender (not borrower) who pays periodically to borrower  so it is called Reverse Mortgage Loan.

Why it is given and how lender protects its interest??

If a Senior Citizen (age 60 and above) has self acquired , self occupied house but very meager income like annuity , pension etc to support himself or/and dependent , he can mortgage his house to bank and bank will start giving Cash at regular interval to him to support his expenses . He does not have to pay back to bank during his life time or his spouse life time to bank. The ownership of house will remain with owner . even after his death ,spouse will continue to get regular income from Bank , on the death of both , bank will have a charge on that house . Legal heir will get the house paying all charges to Bank.(Lender)

Benefits of Reverse Mortgage Loan     

Income Supplement: Enables house-owning Senior Citizens having inadequate income to meet their financial needs for renovation/repairs to house, medical & other personal purposes.

Retaining ownership: The borrower continues to retain ownership of the house.

Social Security: In the absence of social security for Senior Citizens, RML serves as a partial substitute.

No Repayments: A borrower does not have to repay a RML during his or her lifetime or till such time he or she continues to stay in the house.

Freedom and Flexibility: Amount availed under a RML may be utilized for any purpose other than investing in shares, real estate, trading etc.

Eligibility

Must be Senior Citizen , having self acquired house (any where –urban or rural) . The house should be self occupied also.

House built on agriculture land has  however restricted eligibility. Commercial property however is not considered for such loan.

 Purpose :

Loan can be taken for any purpose like daughter’s marriage,children education, house renovation or upgrading or any personal work other than reinvesting in share or security market, real estate, trading , speculative work .

Loan Amount & Interest Rate :

Factors like borrower’s age, status of property like location, valuation etc decides the Loan amount and interest to be charged thereon. Interest rate is same as normal home loan in the range of 6.9% to 9.50 % floating rate  with some processing fee . No guarantor is required.

Period

Such loan is Paid for a maximum period of 20 years or till death of borrower whichever occurs early.

Repayment :

Borrower does not require to pay back the loan during his life time or till he ceases to stay in that house. However borrower is free to repay the loan early as per his/her financial situation..

Taxation :

Periodic money received from Bank is not your Income but a form of loan so there is no tax implication on such loan .

@Ajit Kumar Singh