Reverse mortgage allows senior citizens with inadequate income sources to mortgage their own homes for a monthly stream of income for up to 15 years.It involves a senior citizen borrower mortgaging the house to a lender, who then makes periodic payments to the borrower during the latter’s lifetime. It is a way of monetising the owner’s equity in the house.
The senior citizen borrower is not required to service the loan during his lifetime and on the borrower’s death or on the borrower leaving the house permanently, the loan is repaid along with accumulated interest, through sale of the house.
The Reserve Bank of India (RBI) proposes to come out with prudential norms for reverse mortgage loans to safeguard banks in a falling real estate market. The prudential norms are likely to be announced in the forthcoming annual monetary policy of RBI on April 29.
Read more in The Business Standard article.
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