Reverse Mortgage loan in India-Income post retirement for seniors

Reverse Mortgage loan in India-Income post retirement for seniorsReverse Mortgage loan in India-Income post retirement for seniors

Individuals would accumulative house properties during their life time. However post retirement, due to liquidity issues, Senior Citizens might not be able to utilize the benefits from such house property. Reverse Mortgage loan in India provides a solution for seniors. It provides income post retirement through Reverse Mortgage loan. This topic has been requested by Siri through a comment on one of the article.

What is Reverse Mortgage loan?

Govt. of India has introduced this scheme of Reverse Mortgage Loan in India scheme during union budget of 2007-2008. National Housing Bank would be the regulator for such scheme. Reverse mortgage loan is a life time loan given to Senior Citizen on their residential property, where they get regular income for rest of their life time.

Also read: Complete guide on New Pension Scheme (NPS)

How does this Reverse Mortgage Loan work?

Generally in case of mortgage, a person takes mortgage loans on house property and pays monthly EMI’s till the end of the loan period. Reverse mortgage is exactly opposite to this. A property which is free from loan is reverse mortgaged and regular payments are received by Senior Citizens till their life time on such property.

Features of Reverse Mortgage Loans

  • Any senior citizen who has crossed 60+ years and having a house property is eligible for this loan.
  • The loan would be based on valuation done by the valuation officer of the bank or Housing Finance Company.
  • Maximum tenure for such loan is 20 years.
  • Bank or a Housing Finance Company can give such loans.
  • Payments to seniors would be done on monthly, quarterly, half yearly or annually or lump sum at specific dates.
  • Interest rates are either fixed or floating.
  • Revaluation of the property value would be done by valuation officer of the bank of HFC every 5 years.

What are the interest rates for such loan?

The interest rates are between 12% to 16% per annum.

How the loan is repaid?

There is no repayment of reverse mortgage loan during lifetime of the borrower. Loan value increases year on year upon periodic payments. Upon death or borrower moves away from house, bank would take over the property, sell the property and pay off any excess received amount to its legal heirs. Alternatively, legal heirs can repay the loan along with interest and take over the house property.

How annuity amount is arrived?

Reverse Mortgage loan is given for 60% to 90% of house property value. Annuity (monthly income by way of loan) would be arrived based on loan value, tenure, interest rate etc.

How income from Reverse Mortgage Loan is taxed?

Since the periodic money received is only loan and not income, there is no income tax applicable.

What happens in case of death of one or both spouses?

In case one spouse dies, other spouse would continue to live in their house and would receive regular payments till the life time.

In case both spouses’ dies, bank would take over the property, sells the property and pays excess amount to their legal heirs. Alternatively, after both spouses dies, their legal heirs can re-pay the loan amount along with interest and can take the house property.

Also Read: 7 ways to invest Retirement money in India

Why reverse mortgage loan is not popular in India?

Not many senior citizens have opted for such schemes.

Emotional attachment towards their dream house.

Real estate prices are increasing year on year. Once in a while we are seeing real estate prices correction also.

Lack of awareness about such schemes.

Conclusion: Reverse Mortgage loan is a good scheme for Senior Citizens who want income to meet their regular expenses without leaving their dream house. Creating some awareness among seniors would help them in knowing such schemes better. In case a Senior Citizen does not have children or grown up children who would have otherwise taken care, reverse mortgage loan would be the best option to choose for.

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Reverse Mortgage loan in India-Income post retirement for seniors


  • pattu

    Rev. Mortgage is a last resort option for a person who not had the commonsense to plan for retirement properly when he/she was young. The residual life of the property should be typically 20 years. This will put paid to the plans of most people nearing retirement and considering this.

    The monthly income will typically not be able to pay for all retirement expenses independently.

  • Sirish

    Hi Suresh,

    Thanks for having an article on the same. It would be great, if article give details of the interest rates offered by PSU banks wrt reverse mortagage.

    The only drawback I feel is the valuation of property being done after 5yrs.They should revise it to atleast 3years, so that the monthly income received will be line with current inflation.

    • Agree Sirish. Since reverse mortage interest rates are not readily available and they are available to people on request, I could not include. Let me check whether I can get from anywhere

      • Gur Darshan Kapur

        Hi Suresh,
        If we r living in my wife’s house in Gurgaon,but I want to mortagage my house which is not rented in Panchkula.Is it possible ? My age is 64yrs.It is 3 bhk (1600 sqft).What is the modus oprandi.?A little more in detail if possible

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