Reverse mortgage
This loan category was introduced in India during the 2007 Budget and came into effect from 1 April 2008. It was initiated in collaboration with the National Housing Bank (NHB). It is the exact opposite of a regular home loan, where the borrower takes a loan from the lending institution while purchasing a house. In case of reverse mortgage, as the term suggests, the lender makes payments to the home owner.
This is a special loan arrangement, wherein senior citizens can monetise the value of their residential property without selling it or giving up its ownership. So, if you are 60 years or older and have a self-occupied house, you can generate a steady stream of income by reverse mortgaging your property. The lender provides the payment to the owner while (s)he continues to live in the house.
The loan can be used for various purposes, such as renovation, medical emergency, as a supplementary source of income, etc. However, it cannot be used for speculative, trading or business purposes.
Who offers RML?
Reverse mortgage loan is typically offered by financial institutions like banks and housing finance companies.
Loan disbursal
The loan can be offered as a periodic payment (monthly, quarterly, halfyearly, annually), or as a lump sum, or as a committed line of credit, or as a combination of these three.
Eligibility criteria
- The applicant has to be 60 years or older.
- (S)he has to be the owner of the property, whether it’s self-acquired or inherited.
- The house should also be self-occupied and act as the primary residence for the owner. It should not be rented out.
- A commercial property is not eligible for RML.
- The title should clearly reflect the ownership and be free of any encumbrances or liabilities.
Loan amount & term
The quantum of loan will depend on the value of the house as assessed by the lender, the age of the borrower, and the prevailing interest rates. The loan duration is typically not more than 20 years.
How long does it last?
The borrower(s) can continue to use the residential property as their primary residence till they are alive, or permanently move out of the property, or stop using it as a permanent primary residence. If the borrower dies or vacates the property, the loan can be repaid, along with interest, by selling the property. The borrower(s) or heir(s) can repay the loan and interest without selling the property, or can prepay the loan at any time during or after the tenure.
