Dev Singhraha
Relocation Expert
It’s not possible for a person to keep earning throughout his or her  lifetime. Due to the fact that the person gets aged over the period of years, and there come lots of physical problems. Although everyone makes suitable arrangements to tackle their expenses through different sources like pension interest etc. But these sources may not be enough to meet their monetary requirement, so for the rescue comes the reverse mortgage. Let’s understand it in detail.

A reverse mortgage is a loan available to homeowners, 62 years or older this helps them to avail of periodical payments from a lender against the mortgage of his/her house while remaining the owner and occupying the house. It has conceived as a means to help retirees with limited income use the accumulated wealth in their homes to cover their basic monthly living expenses and pay for health and physical care. The Borrower is not required to service the loan during his or her lifetime and hence they do not have to make monthly repayments of principal and interest to the lender. It called reverse mortgage because instead of making monthly payments to a lender, as per the traditional mortgage rules here the lender makes the payments to the borrower. The borrowers do not have to pay back the loan until the home is sold or otherwise vacated. The maximum period of the loan is 20 years. The Valuation of the residential property is done at certain regular intervals and at a proper time period which is usually done once in the span of every five years. The terms of the loan may undergo certain changes based on such re-valuation of property at the discretion of the lender. If the borrower dies or if the borrower leaves the house property permanently, then the loan is repaid along with accumulated interest, by the seller of the property.
 
Taxation on reverse mortgage
Senior citizen keeps getting the money from the reverse mortgage transaction each month. The next which arises is the nature of the flow of money because if the money received is considered as income then there could be the question of tax having to be paid by the senior citizen because they are receiving the amount. This income remains as a question while doing the financial calculation. However, the good news is there is nothing to worry as such, on the part of senior citizens. The amount that is actually received by the senior citizen from such a reverse mortgage transaction would be considered tax free in their hands as this is not income. It is actually considered as the loan received by them from such a reverse mortgage transaction would be considered tax free in their hands as this is not income. Since it is in the form of loan transaction it would be tax-free as it is not their income. As it is in the form of loan transaction taking place each month it becomes the debt for the senior citizen who is taking it. The amount is specifically mentioned as being tax-free in their hands so there is no question of a tax  arising in the process. This will protect the individual and ensure that there is no financial burden on them. This provides a lot of self-security and assurance to the borrower.
 
Repayment of reverse mortgage loan
Here the answer to the question of repayment of the amount given to the senior citizen is there is no need for the senior citizen to repay the loan with interest when they are alive. After they die or if the borrower leaves the house property permanently bank will sell the property and then recover the loan and the interest. At the same time if the family member has the option to repay the loan and if they want to take back the property that has been mortgaged than they can pay the value of the loan and interest that has been taken by the borrower if there is any excess amount over and above the loan and interest than it would be paid by the bank to their legal heirs.
 
 
 
 
 
 
 
Looking for property portal?

Leave your comments

Comments
Be first to comment on this article
Level up! Take your property mission ahead
Post Property for sell or rent
Quick Links

Top

Disclaimer: Homeonline.com is a Real Estate Marketplace platform to facilitate transactions between Seller and Customer/Buyer/User and and is not and cannot be a party to or control in any manner any transactions between the Seller and the Customer/Buyer/User. The details displayed on the website are for informational purposes only. Information regarding real estate projects including property/project details, listings, floor area, location data Read more