Many senior citizens find it extremely difficult to make ends meet financially post their retirement. That's where reverse mortgage comes in.
So, what is reverse mortgage in real estate? A senior citizen over the age of 60 gives their self-owned house to the bank as collateral. The bank then starts paying the senior citizen monthly installments for their survival and expenditure. It's basically the exact opposite of a home loan.
The maximum amount one can receive is two crores, and the loan tenure is generally between 10 to 15 years. Senior citizens aren't expected to pay off the entire loan amount, and this loan amount can be inherited by their children.
They can either clear the loan amount with interest back to the bank, or the bank can auction or sell the property in order to recover the dues upon the demise of the borrower.
The best part is, as per section 1043 of the Income Tax Act, the periodic funds received by the borrower are not considered as income and hence are tax-free.
Many banks in India, such as SBI, offer reverse mortgage services. However, the reverse mortgage system has not done well in India unlike in Western countries. Here in India, Indian parents don't want to leave their children behind with unnecessary debt once they are gone.
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