subject: Reverse Mortgage Loan [print this page] CENT Swabhiman Plus, a life-long reverse mortgage annuity launched by Central Bank of India and Star Union Daiichi Life Insurance. This product is specially designed for the senior citizens. This product will provide them with a monthly or quarterly or half yearly or annual income as mutually agreed by then borrower and the bank against his/her home.
The earlier version of reverse mortgage scheme has been improvised to provide much more benefits due to feedback received about the insufficient funding of the 20 year cap on annuity payments. NHB asked banks and insurance companies to design a product such that its annuity would not cease after 20 years (though the individual was allowed to stay in the house till death). Thus the revised product provides continuous annuity till the survival of the individual as well as gets higher returns.
Insurers have arrived at the annuity figure using the mortality charts where as the banks discounted the property value at a specific rate to calculate payments. The interest rate under the new scheme by the Central Bank of India is 9.5% against 12.5%, resulting in higher payouts.
There are two choices
Annuitant receives a life annuity at a constant rate till he/she survives.
Annuitant will receive annuity for life with return of the purchase price on his death.
Criterion for eligibility
Applicant should be above the age of 60 years
In case of co-borrowers, atleast one of the borrowers should be above 60 and the other should be above 55 years of age.
IMPORTANT The owned property should be free from any hindrances.
The bank will lend up to 60-75% of the property value.
ADVANTAGES
Provides life time income which can be used for any financial need like house renovation, medical or other personal expense etc.
Borrower has the option of 25% of the loan amount (up to Rs.15 lakh max) which can be used in case of any emergency. However, it is not advisable to use this money for trading or speculative purposes.
BUT
Payment under reverse mortgage loan are exempt from Income Tax under Section 10(43) of the Income Tax Act, 1961, the monthly or periodic annuity are defined as salaries hence, taxable under Section 17 of the I-T Act. Although any amount received as loan (lump sum or in installments) under this scheme is not taxable as it is not regarded as income. And the bank has the right to foreclosure of the annuity if the borrower has not stayed in the property for a continuous period of one year (even if he or she has to move in with his son or daughter due to ill health or any other reason).
