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The National Housing Bank (NHB) plans to allow senior citizens to mortgage their residential property to a bank or a housing finance company while retaining the right to stay, with an aim to provide a steady income to them.

The house owners who have crossed 60 years of age will be allowed to seek loan up to 60% of the value of the residential property which they need not repay, says the draft reverse mortgage loan (RML) guidelines issued by the NHB for public comments.

The house owners can opt for monthly, quarterly or annual payments to supplement their income. They may also prefer one time payment or a committed line of credit from the bank/HFC to be used in times of need.

The income which a house owner receives by mortgaging his house, according to the draft guidelines, will go up with revaluation of property which has to be undertaken by the banks/HFCs every five years.

The bank/HFC will recover the loan along with interest on death of the owner or expiry of mortgage period by selling the house and remit the excess amount to the owner or his heirs. The owners will also have the right to repay the loan to discharge the mortgage.

The draft guidelines for reverse mortgage were issued by the NHB in pursuance of the budgetary announcement made by finance minister P Chidambaram to allow senior citizens who own house to have a monthly stream of income to meet old age exigencies.

As per the guidelines, married couples having crossed 60 years of age will be eligible to participate in the scheme as joint borrowers provided they are using the property as their permanent residence.

As the scheme is restricted to residential property used as residence, commercial property will not be eligible for reverse mortgage loan.

The guidelines further state that senior citizens between 60-70 can obtain loan up to 45% of the value of the property; between 71-75 up to 50%; between 76-80 up to 55% and above 80 up to 60%.

The amount of loan will depend upon the market value of property to be determined by an approved valuer.The residential property, as per the guidelines, will have to be valued frequently and in no case later than five years to adjust the quantum of payment whether periodic or lump-sum amount to the house owner.

The funds obtained under the scheme, as per the guidelines, can be used for specified purposes which include gradation and maintenance of house; medical and emergency expenditure for maintenance of family; supplementing pension and other income; repayment of an existing loan taken for the residential property to be mortgaged; and meeting any other genuine needs.

The house owner will also have the option to move out of the residence to an old age home or to live with relatives after settlement of loan by selling the property.The reverse mortgage guidelines are likely to be finalised and operationalised by May end.

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