Reverse Mortgage Loan enabled Annuity (RMLeA)

National Housing Bank (NHB) in collaboration with Star Union Daichi Life Insurance Company Ltd., (SUD Life) and Central Bank of India (CBI) have introduced Reverse Mortgage Loan (RML) to ensure lifetime annuity payments to senior citizens. Senior Citizens can avail a reverse mortgage loan against their property from the lending institutions, scheduled banks and housing finance companies registered with NHB. The loan amount received under RMLeA can be used for various purposes like medical expenses, day-to-day needs, up-gradation and renovation of the property, and any other consumption need. In this article, we look at the Reverse Mortgage Loan enabled Annuity (RMLeA) in detail.

Eligibility Criteria

The following are the eligibility criteria to apply for the reverse mortgage loan.

The applicant should be above 60 years of age.
Married couples are also eligible as joint borrowers but the age criteria will be applicable for one among them, and the other should not be below 55 years of age.
The applicant should be the owner of the self-occupied residential property located in India.
The residual life of the property must be at least 20 years.
The prospective borrowers should use that residential property as the permanent primary residence.
The value of the property should not be below Rs.5 lakhs.

Loan Amount

The amount of loan will depend on the market value of the residential property as assessed by the Primary Lending Institutions (PLIs), age of borrowers, interest rate or any other factor as specified by the PLI. The maximum Loan to Value (LTV) Ratio computed against the current value of the property is given below:

Age of Borrower	Maximum Loan to Value Ratio
Between 60 and 70	60%
Between 70 and 80	70%
80 and above	75%

Nature of loan

The borrower can opt for the loan amount either monthly, quarterly, half-yearly, annually or lump sum payments.

Period of Loan

The maximum loan disbursement tenure will be until the demise of the borrower.

Interest Rate

The PLI will fix the interest rate to be charged on the RMLeA based on the risk perception and loan pricing policy.

Security

The mortgage of residential property from which the loan has to be sanctioned has to be produced as the collateral security.

Processing Fee

The PLI will collect the loan processing charges from the borrower which includes an origination fee, appraisal fee, inspection fees, property verification fee, title examination fees, legal fees, survey and property valuation fees and additional service charges are also applicable.

Taxation

All payments under reverse mortgage loan are exempt from income tax under Section 10(43) of the Income Tax Act, 1961. However, periodic annuity payments are taxable under Section 17, 56 and 80CCC of the Income Tax Act.

Loan Settlement

The loan amount will become due only when the surviving borrower dies or would like to sell the property or permanently moves out of the home, in such cases documentary evidence as to be submitted to the PLI. At the sale of Residential Property the loan along with accumulated interest has to be settled by the borrower.

Prepayment of Loan

The borrowers will have the option to prepay the loan at any time during the loan tenor. PLS will not impose any penalty or charges for such prepayments. In case of such advance of loan amount by the borrower to the PLI, the PLI should release the mortgage of the house property and return the related documents to the borrower.

Foreclosure

The loan is eligible for foreclosure in the following conditions:

If the borrower has not present in the residential property for a continuous period of one year.
If the borrower refuses to pay property taxes or maintain and repair the residential property.
If the borrower declares himself as bankrupt.
If the borrower performs any illegal activities.

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Frequently Asked Questions

Common questions about Reverse Mortgage Loan Annuity for Seniors in India.

A Reverse Mortgage Loan enabled Annuity (RMLeA) is a financial product that allows senior citizens to avail a loan against their residential property. The loan amount can be received as a lump sum or periodic payments, and it is repaid when the borrower passes away or moves out permanently.

To be eligible for the RMLeA, the applicant must be above 60 years of age, and if married, the spouse should be at least 55 years old. The applicant must own a self-occupied residential property in India with a residual life of at least 20 years and a value of not less than Rs. 5 lakhs.

The loan amount under the RMLeA depends on factors such as the market value of the residential property, the age of the borrower, and the interest rate set by the lending institution. The maximum Loan to Value (LTV) Ratio ranges from 60% to 75%, based on the borrower's age.

Borrowers can choose to receive the loan amount as monthly, quarterly, half-yearly, annual or lump sum payments, as per their preference and requirement.

The maximum loan disbursement tenure under the RMLeA is until the demise of the borrower. The loan becomes due and must be settled when the surviving borrower passes away or decides to sell the property or move out permanently.

All payments under the RMLeA are exempt from income tax under Section 10(43) of the Income Tax Act, 1961. However, periodic annuity payments received are taxable under Sections 17, 56, and 80CCC of the Income Tax Act.

Borrowers have the option to prepay the RMLeA loan at any time during the loan tenor without any penalty or charges. In such cases, the lending institution will release the mortgage on the property and return the related documents to the borrower.

The RMLeA loan can be foreclosed if the borrower is absent from the residential property for a continuous period of one year, fails to pay property taxes or maintain the property, declares bankruptcy, or engages in any illegal activities.

When the surviving borrower passes away or decides to sell the property or move out permanently, documentary evidence must be submitted to the lending institution. The loan amount, along with accumulated interest, must then be settled by the borrower or from the proceeds of the property sale.

Lending institutions may collect loan processing charges from the borrower, including an origination fee, appraisal fee, inspection fees, property verification fee, title examination fees, legal fees, survey and property valuation fees, and additional service charges.