Whenever someone thinks and contemplates about life after retirement, the typical issues that invade our mind are adequate economic assistance and absence of monthly salary to take care of health care, living costs and other daily needs. Most senior citizens have a property in their names; however, due to its inherent illiquidity, the same cannot be transformed into immediate and periodic income stream. Each one of these concerns can be taken care of by an idea or concept known as “Reverse Mortgage”

Reverse mortgage in easy words, is the precise opposite of conventional mortgage loans. In mortgage loans, the person pays equal monthly installments (EMI) to the monetary organization fore buying a property. Whereas, in reverse mortgage, the senior citizen who possesses a home or an estate, but lacks a periodic source of income, can leave his estate or mortgage his properties to the economic organization or the financial institution and the economic organization pays back a regular stream of income. Here the borrower (i.e. the person who pledges the estate) remains in the estate until the end of his lives and gets a regular deposit on it.

When the home is pledged, the bank reaches its monetary value on the basis of the property’s demand, current property prices, and the house’s condition. After considering a margin for interest expenses and cost changes, the bank then disburses a loan to the borrower with periodical payments over a fixed time period. The regular payments are also referred to as the inverse EMIs.

House owners above the age of 60 years are eligible to apply for reverse mortgage. If wife is a co-applicant, she should be over 58 years old. The Owners of a self-acquired, self-occupied, housing or flat are only eligible. The titles should be evident, showing possession of the estate by the potential borrower. The property should be free of burdens and it should be the permanent residence of the borrower.

A reverse mortgage loan becomes due when the last remaining borrower dies, or when the borrower chooses to sell the home. In that case, firstly the bank provides the next kin an alternative to settle the mortgage together with acquired value, without sale of the property. If the next kin fails to settle the mortgage, then the bank decides to recover the same from the property’s selling proceeds.

Any additional sum, after settlement of the loan with accumulated interest and costs, through the property sale, is passed on to the legal beneficiaries.

Loss is generally borne by the bank when the sale proceeds get lower than the accrued principal plus interest amounts. This misfortune could occur in situations where the bank’s unique estimation isn’t in accordance with the real estate market value