What is Reverse Mortgage?

May 14, 2011     Posted under: Home Loan

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What is it: Through reverse mortgage, capital value of a home is converted into an annuity over the home owner’s lifetime

How Does it work: The bank gives the mortgage loan against the value of the property. A person gets annuity for as long as he lives. On his death, the principal amount is paid back to the bank

Time Limit: Most reverse mortgage loans from banks have a time limit of 20 years. The property is mortgaged to the bank

Can the property be inherited: If the owner’s children don’t pay up the interest part and free up the mortgage, the bank will sell the property

Does not qualify as income: Reverse mortgage loan does not amount to “transfer of property” under the head capital gains tax

NitiN Kumar Jain

Nitin works in an IT MNC professionally but blogs and owns NKJ Live. He is also the co-owner of a professional start-up ARGHAM BYTES

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