Bank mortgage reverse also known as lifetime mortgage is a mortgage plan available to senior citizens. By its name, it can be very easily understood that it is the opposite of a traditional home loan. With a home loan, the borrower pays money installments. But with reverse mortgage, the lender pays monthly installments to the borrower. The reverse mortgage works pretty simple. The person would pledge his house which has not other loan dues outstanding on it. The bank or the lender would then pay the borrower regular cash for a fixed period of time. The tenure of the mortgage is usually fifteen years and the borrower can live with his spouse in the house till he dies. After the death of the borrower, the spouse can continue to live in the house. If the spouse dies too, then the heirs would have 12 months to pay the outstanding amount on the mortgage and get back the house.
The age of the borrower is usually above 60 years and the total loan amount is not more than 60 percent of the value of the house. The period of the regular installments is usually 15 years and the borrower has the option of preferring monthly, quarterly or half-yearly payments. The home under the reverse mortgage agreement is revalued once in five years. The regular installments that the borrower gets is not treated as income and therefore those regular payments cannot be taxed. The rate of interest for the payments could be either fixed or floating in nature. The same has to be chosen by the borrower. Most of the borrowers who are senior citizens go for fixed rates of interest as they do not want to go through the stress of falling rates, as falling rates would bring down their regular installments to quite an extent.