Reverse mortgage loans are a unique financial product, which is beginning to gain popularity in India. Launched in 2007, these lines of credit are different from all the other available loan options. These unique features of such loans are listed below in detail.

• Regular cash inflow: A financial product, primarily meant for equity-rich individuals, these loans offer its borrowers a steady cash inflow. Borrowers can choose this frequency of financial influx, making it especially convenient for its applicants who are usually without any income, such as senior citizens. 

• No risk of default: A significant reverse mortgage benefit is that financial institutions use the collateral for loan repayment, thereby eliminating any risk of default.

• High loan sum: A borrower has his/her property evaluated and, accordingly, a loan sum is fixed by financial institutions. This usually leads to a substantial loan quantum, disbursed as regular payments to its borrowers. 

However, despite these unique benefits offered by such reverse mortgage loans, there are a few disadvantages associated with these loans. A vital issue that might come up is that of its repayment in the event of a borrower outliving its repayment tenor.

Furthermore, these loans often lead to the loss of a property for an heir since financial institutions hypothecate such properties to clear a borrower’s debt. To avoid such issues, borrowers can opt for loans against property, secured lines of credit.

However, unlike reverse mortgage, LAP allows a borrower to repay his/her loan slowly over time and thereby reduces any chance of losing property by defaulting on this credit.

By the year 2013, approximately Rs.1800 crore was sanctioned as reverse mortgage loans in India. The said scheme has been designed to cater to the financial requirements of senior citizens. Borrowers can benefit under this scheme by mortgaging their residential property to the lender and availing monthly income instead of repaying monthly instalments.



The following list highlights the benefits of reverse mortgage –

Zero restrictions on end-use – By opting for a reverse mortgage, individuals are entitled to avail lump sum funds as a monthly payout. The money thus availed can be used to meet monetary needs without any end-use restriction.

Tax savings – Since reverse mortgages are considered loan advances; it is not treated as accrued income. This is why the payouts received by the borrowers are not subjected to taxation.

Convenient repayment option – Borrowers are not required to repay a portion of their loan amount every month. They are only required to repay the loan value once they decide to sell the property under question or move out of it. Also, irrespective of the amount availed as loan; borrowers have to repay funds equivalent to the mortgaged property’s prevailing market value.

Easy to meet criteria – Individuals, who are at least 60 years of age and have possession of the property for a minimum of 20 years, are deemed eligible for this loan option. Additionally, individuals are required to submit basic KYC documents and financial statements to complete the application process quickly.

Contrarily, individuals who wish to avail a substantial loan value against their residential property may apply for a loan against property to fund their immediate financial requirements. Besides the easy to pay loan against property interest rate, the repayment options accompanying the credit option is also quite convenient.

The facility of a reverse mortgage loan was initiated in India in 2007. It is a unique credit facility which allows individuals above 60 years of age to meet living expenses post-retirement.

Reverse mortgage in India is a convenient credit facility which where borrowers mortgage their property and use its value to secure a steady source of income. This financing scheme is highly beneficial for senior citizens who are without a bankable income source and require other earning options to mitigate their expenses.



How does a reverse mortgage scheme work? 

Senior citizens, who possess a residential property, can use it as a mortgage to avail a loan against it. However, it does not work in the same way as a loan against property, where you avail a lump-sum amount which you need to repay within a pre-specified tenor.

In the case of reverse mortgage loan in India, the loan amount is meted out in these three ways –

• Lump-sum part payments
• Periodically
• Other periodic disbursal's as agreed by the mortgagor and the financier

Another feature which distinguishes it from a traditional credit facility is you are not liable to repay the loan during your lifetime. The concerned financial institution would sell the property only after the decease of the primary borrower or if the borrower and nominee move out of the property. However, owners of the property or their next in kin can decide to repay the loan if they want to retain it.

The loan quantum of a reverse mortgage credit depends on the following factors –

• The market value of the property at the time of application
• Age of the homeowner(s)
• Applicable interest rate
• Limits prescribed by the government on lending

There are other types of loan against property which you should know about before committing to a reverse mortgage loan.

Must Read : Reverse Mortgage Myths - Every Borrower Should Know Before Applying

Reverse mortgage loan are relatively new to India. As a result, there are a few confusions regarding its eligibility and document requirements. It is crucial for senior citizens to understand these requirements not just to make the application process convenient but also help them in choosing the right scheme.



The eligibility criteria for such schemes are discussed below –

• Though it depends from one financial institution to another, the minimum age to be eligible for such a scheme is usually 58 or 60 years.
• The property that is to be mortgaged should be in the name of the borrower or jointly with his/her spouse to be eligible for collateral. 
• For joint loan schemes, the minimum age of spouse is also usually mentioned. Though it varies from one lender to another, generally it must be at least 55 years of age.

The documents required to apply for a reverse mortgage scheme are listed below –

1. Government-issued photo identity proof like Voter ID, Aadhaar card, Passport, Driving Licence, etc. 
2. Address proof like electricity bill, telephone bill, ration card, etc. 
3. Copy of PAN card. 
4. Property documents including ownership deeds. 

While the list of documents required for such a loan scheme is very similar to that of a loan against property, the criteria are vastly different. Vitally, loans against property are also mortgage loans, but they have a more convenient repayment option.

 While in case of the former a borrower must repay a lump sum amount, in case of the latter, the repayment is spread over EMIs. This convenience of repayment and other benefits should be checked before finalising on the scheme.

Must Read: Property Mortgage Loan Interest Rate

Additional Read: How Can One get a Mortgage Loan at a Low-Interest Rates?