December 11, 2009

INDIA: Central Bank-Sun Union Dai-chi Life Offer Reverse Mortgage Home Loans

. NEW DELHI / The Hindu / Business / December 11, 2009 The reverse mortgage loan will provide regular income for senior citizens Central Bank of India, in association with Star Union Dai-chi Life Insurance, on Thursday launched a loan product that will provide regular income for senior citizens throughout their lives against the house as an asset. “Central Bank of India and Star Union Dai-chi Life Insurance Co have launched reverse-mortgage enabled loan annuity product branded as Cent Swabhiman Plus,” bank Chairman and Managing Director S. Sridhar said. The product will help senior citizens avail themselves of regular payments throughout their lives by mortgaging their house with the bank. The scheme is open for senior citizens above the age of 60 and a spouse with a minimum of 55 years. “They can also continue to stay in the house as long as the last surviving spouse is alive,” Mr. Sridhar added. This annuity product is an improvement to the reverse mortgage loan product, Cent Swabhiman, offered by Central Bank and by some other banks and housing finance companies. The new product assures lifetime payment against a maximum of 20 years in the existing similar products. Besides, the quantum of monthly payment is significantly higher. Features of the product include regular income within a month of joining the scheme, a choice of monthly, quarterly, half-yearly and yearly annuity payment and also an option of lump-sum payment of 25 per cent of the loan amount, with a maximum Rs. 15 lakh. The loan quantum will depend on the market value of the house, borrower’s age, and prevalent interest rate. The quantum of the loan will be at the discretion of the lending institution. At present, there is an interest rate of 9.5 per cent on the loan amount, though it would vary according to market conditions. There are two annuity options for the scheme: a life annuity payable at a constant rate as long as the annuitant survives and an annuity for life with return of purchase price on the death of the annuitant. Finance Ministry Additional Secretary G. C. Chaturvedi, who was present at the launch, said efforts should be made by the bank and the insurance company to ensure proper service delivery mechanism for the product. Mr. Sridhar said that regular payments on lease house would be determined on a case-by-case basis. [rc] Copyright © 2009, The Hindu.