Why most retirees don’t find refuge in reverse mortgage

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₹1 crore, then the maximum loan amount is capped at ₹80 lakh. It is important to note that the loan amount will be 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 ₹15 lakh) of the total loan amount.

This amount gets deducted from the total loan amount. The loan amount ( ₹80 lakh in the above example) comprises both the principal and interest. After every five years, the property is revalued by the bank to reflect any change in its worth.

If the house value has increased, the loan amount is usually readjusted upwards. If the value has gone down due to some reason such as wear and tear, it can also be adjusted downwards. The loan amount is typically paid over 15 years but some banks have the option of spreading it over 20 years, The monthly income will stop after the loan tenure is over but there is no need for the borrower to repay this loan in their lifetime.

Also, only when the couple die, can the banks auction the property and recover the loan. Any remaining amount from the sale proceeds is passed on to the legal heirs. The banks will give legal heirs of the deceased the option to pay off the loan and take possession of the house before putting it for auction.

Note that the monthly payment by the bank (principal and interest) is not subject to income tax. Another important point to note is that less than half the total loan amount will be actually disbursed in the form of monthly payments. This is because the total loan amount also includes the interest portion to be paid over the years.

(see graphic). A few factors make reverse mortgages not so attractive for both senior citizens and the banks. Mint visited a few public