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Tata Capital > Blog > Reverse Mortgage Loan: Pros and Cons

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Reverse Mortgage Loan: Pros and Cons

Reverse Mortgage Loan: Pros and Cons

Are you a homeowner close to retirement age? If yes, then you must consider a reverse mortgage that allows you to earn a monthly income post-retirement.

A reverse mortgage loan is a loan facility where a borrower receives payouts, either monthly or in a lump sum, against their property. But if you’re considering a reverse mortgage, you must weigh all the pros and cons.

Let us first understand what the term entails and how you can generate a regular income by unlocking your home’s value.

What is a reverse mortgage?

A reverse mortgage is a home loan that allows you to borrow funds against a self-occupied/self-acquired property in India. What makes reverse mortgage unique is that lenders typically don’t review the borrower’s credit history or income. All the repayment terms are based on the value of the borrowers’ home.

Moreover, you can repay the loan when you or your heir sells the house. Also, there are multiple reverse mortgage options and schemes provided by lenders that you can consider before making your decision.

Pros of reverse mortgage

• Secure your retirement

Many seniors struggle with reduced income after retiring, as it gets challenging to manage daily expenses. This can be easily solved with a reverse mortgage as you receive monthly payouts from the lender.

Additional Read: Documents Required for Senior Citizens or Pensioners to Get Home Loan

• Age in your own home

Instead of selling your house to liquefy your assets, a reverse mortgage helps you keep your home and make cash from it. This means you won’t have to move locations and sell your property. Instead, you can stay near your friends and family well past your retirement.

• No tax liability

The payouts you get from a reverse mortgage are not considered taxable income as they are counted as a loan. Thus, there is no need to pay tax on these funds, unlike other income sources.

• Pay off the existing home loan

Another exciting benefit of a reverse mortgage is that you can use the proceeds to pay off your existing loan. Use a home loan EMI calculator online to get a precise estimate of your monthly EMIs and use the reverse mortgage income to pay it off.

Additional Read:  How You Can Repay Your Home Loan Quicker

Cons of reverse mortgage

• Accumulating interest

As a reverse mortgage does not require monthly payments, the interest is not deducted each month. This results in the amount accumulating over time and growing larger.

Conclusion

With a growing senior population in India, a reverse mortgage has undeniably become a game-changer. The prime benefit of this unique housing finance solution is the financial security and mental peace it brings. Regardless, you must carefully consider all the pros and cons of the loan before applying.

But once assured, you can opt for a trusted lender like Tata Capital! Enjoy a range of benefits on our housing finance solutions, including attractive home loan interest rates, flexible EMIs, convenient repayment terms, and much more! Use our EMI calculator to determine the best plan that fits your budget.

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