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Reverse mortgage a good option for elders

business Updated: Nov 14, 2010 21:42 IST
Hindustan Times
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Mint, Hindustan Times and NDTV, bring you a personal finance show, “Let’s Talk Money”. The weekly call-in show, anchored by Monika Halan, editor, Mint Money, and Manisha Natarajan, editor and senior anchor, special programmes, NDTV, aims to answer viewers’ questions about money-related issues. Here are edited excerpts from the show that aired over the weekend on NDTV Profit and NDTV.

Gaurav Singh: Are third-party investments like mutual funds, company deposits through independent online portals safe? Do they have any recognition, or are they being regulated by any authority? What are the checkpoints?

Halan: Yes, there is a problem of the distributors getting regulated by a single entity. India has no such distributor regulator right now. So you have distributors of funds regulated by SEBI, insurance through IRDA (Insurance Regulatory and Development Authority) and bank products by RBI. The distributors who are online actually do not have a single regulator because they are intersecting with the banking sector and SEBI, but having said that there are enough checks in place.

There is KYC (know your customer norms) which is for customers. This is now being put in place for distributors. The sites which you have mentioned will have to display that certification which says that the promoters are being fingerprinted, there is a trail of who they are...The minute you press the button on your laptop to invest, it will go to an account which is not of the AMC (asset management company), but very soon the money is transferred to a mutual fund and when you redeem, money goes straight to your bank.

Natarajan: It’s all through a payment gateway through which all Internet transactions go so here is a huge amount of security.

Madhu Sabarwal: I have been a single working woman. After retirement I got some money from gratuity and provident fund (around R15 lakh) which I have invested in senior citizens savings scheme and post office schemes. The money which I am getting from these schemes is not enough. I want to know how I can generate more money. I am living in a 2-bedroom flat in south Delhi which has a current valuation around R80 lakh.

Halan: Madhu, have you heard of a product called reverse mortgage? The product fits you like a glove. What happens is that it’s like a reverse loan that you take—the bank will own the property and will pay you instalments every month. So you get about 60-80%, depending on the product you choose, of the value of the house. So if it’s `1 crore it becomes `60 lakh of corpus. A very good product in the market is Cent Swabhiman Plus from Central Bank, which gives you an annuity.

It is important to understand that all other products will be 10-year, 15-year products, except for the Central Bank product. The money will then go to an insurance company, which will give you money every month till you are alive. So that is the product to go for. Talk to the bank very carefully and then only sign up for it. I think it’s fairly good to go through this product, but remember to make a will. After 20 years, the house will increase in value and if you want to give it to a charity, you like to make a will and leave it with the bank and enjoy the money.