Difference Between Mortgage Loan And Reverse Mortgage Loan

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Mortgage means to place collateral. Therefore, a Guest Posting mortgage loan in the home loan industry is the loan taken against the property pledged as collateral. The mortgage loan is beneficial in comparison to other instant loans such as personal loans and business loans because of its rate of interest, processing fees, foreclosure charges & closure conditions, etc. Also referred to as Loan Against Property, a mortgage loan is taken to meet the personal fund requirements such as children's education, child marriage, medical treatment, business expansion, etc. The mortgage loan by lender Bank/NBFC/HFC is provided only to those borrowers who have a regular flow of legal income and is within the maximum retirement age of 60 years. As a result, the senior citizens were excluded from taking a mortgage loan. Hence with the view to extending the benefits of mortgage loans to the elderly, the Union Government of India introduced the concept of Reverse Mortgage allowing them to borrow the funds through property mortgages, to meet their financial requirements of day-to-day expenses and increase the cost of medical treatments. Many times one has to face many mistakes while getting the car financed, so wanted to avoid that thing and contact the good dealer

Difference between Mortgage Loan & Reverse Mortgage Loan

1 A mortgage is a type of secured loan as it is secured against the collateral provided. The collateral means pledging of property to obtain the loan.

Loan for senior citizens above 60 years to avail regular/periodical payments from Banks/ NBFC against the mortgage of their house while still retaining the ownership of the house and occupying the same.

2 Who Can Apply

Salaried and self-employed individuals.

Retired, senior citizens above 60 years.

3 Purpose

It can be used for children's education, child marriage, and business expansion.

Can be used only to meet livelihood expenses and medical expenses.

4 Property Type

Ownership of residential, as well as commercial property, can be mortgaged.

Only ownership of residential property can be mortgaged.

No commercial property is allowed.

5 Property Ownership

Ownership transferred on the ancestral property as well as property with gift deeds can be considered.

Ancestral property is not considered. The senior citizen must possess a self-acquired and self-owned or jointly owned property with the spouse.

6 Residential Life Of The Property

5 years – 50 years. Above 50 years structural audit report is mandatory.

Should not be less than 20 years.

7 Providers

All banks and NBFCs.

Only selective nationalized banks and few private banks.

8 Age Limit

Salaried – up-to 60 years

Self-employed – up-to 65 years

Senior citizen above the age of 60 years.

9 CIBIL

CIBIL score of a minimum of 750 and above is required.

Does not require any credit score requirement.

10 Loan Tenure

Maximum 15 years.

Minimum 10 years till the lifetime of the borrower’s age.

11 Processing Fees

0.40% - 1.5% of the loan amount.

0.50% of the loan amount.

12 Interest

Interest is charged on the total principal and is paid up-front with the principal in equated monthly installments.

Interest is charged only on the principal amount taken and the interest is rolled to the principal amount, payable on loan closure.

13 EMI

Consists of Principal + interest amount.

There is no such EMI.

14 Repayment

Repayments are made via EMI throughout the loan tenor OR when the borrower willingly pre-closes the loan.

Loan + interest becomes payable only when the borrower sells the house or moves away permanently or when the last surviving borrower dies OR when the borrower willingly pre-closes the loan.

Note: Important documents must be maintained to authenticate and justify the end-use of the loan, in order to claim the income tax exemption on interest.

All payments under a reverse mortgage are exempt from Income Tax, under section 10(43).

If the bank sells the property, the borrower becomes liable to pay the income tax on the capital gain derived from selling the property.

Also, the annuity income in the hands of the borrower is taxable.



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