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Why mot retirees don’t find refuge in

reverse mortgage

I t would be the deal of the century, or so Andre-Francois would have to submit a list of documents, including proof of

the person's identity and the title deed of the house. The
Raffray could have thought. The Frenchman had in
December 1965 stuck a deal with 90-year-old Jeanne
applicant needs to make sure that there is no property
Calment to pay her 2,500 francs every month until she died. dispute and that it is not agricultural land or commercial
After that, he would get her house. Little did he know that property.
Calment would go on to live for another 32 years and
become, arguably, the oldest person to have ever lived. She After the documents are verified, the bank will appoint a
died on 4 August 1997 aged 122. Raffray died before her valuer to assess the market value of the house. This is done
but ended up paying more than double the value of the to know how much the banks can lend against the property.
house. Banks typically offer up to 80% of the house value as a loan
and maintain the rest as a safety net. For instance, if the
This famous anecdote spotlights the importance of reverse house is worth Rs. 1 crore, then the maximum loan amount
mortgage for pensioners. A reverse mortgage is a special is capped at Rs. 80 lakh.
type of loan that allows senior citizens to mortgage their
It is important to note that the loan amount will be
homes without having to make any loan repayments and
thus helps them tide over financial difficulties. disbursed as monthly payments. In case of a medical
emergency or other such cases, most banks offer lump sum
payments of up to 50% (capped at Rs. 15 lakh) of the total
In India, a senior citizen can ink a similar deal with banks,
albeit with some tweaks. Considering that bank fixed deposit loan amount. This amount gets deducted from the total
loan amount. The loan amount (Rs. 80 lakh in the above
rates are going down and healthcare expenses rising,
example) comprises both the principal and interest.
financial experts see reverse mortgage a good option for
retirees. The homeowners get a fixed monthly payment for
letting the banks auction off their property after their deaths
to recover the loan dues. Any remaining amount is passed
on to their legal heirs.

How reverse mortgage works
A senior citizen above the age of 60 and with a residential
property in their name can apply for a reverse mortgage
loan. In the case of couples, the spouse should be at least
55 years old.

Once the person decides to take the loan, the applicant

BANKING FINANCE | FEBRUARY | 2024 | 45