Why mot retirees don't find refuge in reverse mortgage

It would be the deal of the century, or so Andre-Francois Raffray could have thought. The Frenchman had in December 1965 stuck a deal with 90-year-old Jeanne Calment to pay her 2,500 francs every month until she died.

After that, he would get her house. Little did he know that Calment would go on to live for another 32 years and become, arguably, the oldest person to have ever lived. She died on 4 August 1997 aged 122. Raffray died before her but ended up paying more than double the value of the house.

This famous anecdote spotlights the importance of reverse mortgage for pensioners. A reverse mortgage is a special type of loan that allows senior citizens to mortgage their homes without having to make any loan repayments and thus helps them tide over financial difficulties.

In India, a senior citizen can ink a similar deal with banks, albeit with some tweaks. Considering that bank fixed deposit rates are going down and healthcare expenses rising, financial experts see reverse mortgage a good option for retirees. The homeowners get a fixed monthly payment for letting the banks auction off their property after their deaths to recover the loan dues. Any remaining amount is passed on to their legal heirs.

How reverse mortgage works

A senior citizen above the age of 60 and with a residential property in their name can apply for a reverse mortgage loan. In the case of couples, the spouse should be at least 55 years old.

Once the person decides to take the loan, the applicant would have to submit a list of documents, including proof of the person's identity and the title deed of the house. The applicant needs to make sure that there is no property dispute and that it is not agricultural land or commercial property.