Mar­gin

Consumer Voice - - Bfsi / Reverse Mortgage Loans -

This is not the ‘mar­gin’ you nor­mally as­so­ciate with a bank loan prod­uct, where you pro­vide your stake cap­i­tal or risk cap­i­tal for the loan. Here, mar­gin com­po­nent is meant to con­vey that a cer­tain por­tion of the value of the prop­erty ar­rived at will be de­ducted to­wards mar­gin and the loan will be based on the value of the prop­erty thus ar­rived.

In­ter­est Re-fixed

In this sys­tem, the in­ter­est rate is ini­tially of­fered for a lim­ited num­ber of years gov­ern­ing the loan. There­after, the in­ter­est rate is re-fixed or re-set (mostly it is a mar­ginal rise in ROI) for an­other fixed pe­riod of the loan ten­ure. The bank gives the bor­rower the op­tion to agree to the in­ter­est re-set or close the loan.

Salient Fea­tures

Re­v­erse mort­gage does not re­quire in­come or credit his­tory of the bor­rower as re­pay­ment is based on the value of the house owned by the bor­rower. The amount re­ceived from the lender is not tax­able, as the same is con­sid­ered as loan and not in­come.

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