SBI to launch reverse mortgage loan

State Bank of India is launching on 12thOctober 2007, a new product "SBI Reverse Mortgage Loan" for the benefit of senior citizens.

The product is for the benefit of senior citizens, above the age of 60 years. They can avail loans, released in monthly or quarterly instalments or as a lumpsum payment at the beginning, against the security of their self-acquired, self-occupied houses. The loan will be given jointly if the spouse is alive, provided he/she is above 58 years of age. The loan need not be repaid by the borrowers during their lifetime. They will also continue to stay in their houses during their lifetime. Thereafter, an option is available to the legal heirs to repay the Bank loan and redeem the house property. If this option is not exercised, Bank will sell the property and liquidates the loan. Surplus, if any, will be passed on to the legal heirs.

The loan is available at all branches of SBI. The loan carries a fixed interest rate of 10.75% p.a. subject to reset at the end of every 5 years along with revaluation of security and re-adjustment of loan instalments, if necessary. For a loan of Rs. 1 lac the monthly payment to the borrower on a 10 year loan is Rs.468/- and on a 15 year loan it would be Rs.225/-. Similarly for a loan of Rs.1 lac, the quarterly payment to the borrower on a 10 year loan is Rs.1,423/- and on a 15 year loan it would be Rs. 687/-.