Reverse Mortgage

Retirement

Reverse mortgage allows senior citizens (60+ years) who own their home to receive regular monthly income from a bank by pledging the house, without selling it. Payments are received monthly and the loan becomes due only when the borrower sells, moves out permanently, or passes away.

In detail

How reverse mortgage works in India:n1. Senior citizen pledges owned house to bankn2. Bank values property, sanctions up to 60% of valuen3. Pays borrower a fixed monthly amount for 15-20 yearsn4. Interest accrues (compounded)n5. On borrower's death: heirs can repay the loan and retain property, or allow bank to sell propertyn6. Any surplus after bank recovery: given to heirsnnReverse mortgage in India (PMRY scheme): NHB-regulated. Quantum: typically Rs 15,000-50,000/month for Rs 50L-1.5 Cr property.nnTax: monthly payments received are not taxable income.

Formula

Monthly payment = Property value x LTV (60%) / Payment period monthsn(Simplified -- actual is present value calculation with interest)

Real-life example

🇮🇳 India example

Retired couple owns Rs 80L house, no liquid savings. Reverse mortgage: bank values at Rs 70L, sanctions Rs 42L (60%). Monthly payment for 15 years: approximately Rs 23,333/month. This covers their living expenses. On death: if heirs pay Rs 42L + accumulated interest within 6 months, they get the house back. Otherwise, bank sells and heirs get surplus.

Frequently asked questions

Is reverse mortgage popular in India? ▼

Relatively uncommon compared to Western countries. Most Indian seniors prefer to live with children rather than take reverse mortgage. Emotional attachment to property and desire to leave inheritance makes it unpopular despite financial logic. It is however a practical option for asset-rich, income-poor retirees with no heirs or who prefer independence.