On the advice of a well wisher, Ajay contacted a fee only Certified Financial Planner who advised him to go for the reverse mortgage scheme. Many banks have introduced the Reverse Mortgage scheme in India. What is reverse mortgage scheme? In a normal mortgage, the borrowed or principal amount is paid back by the borrower in equated monthly installments over a period of time. In reverse mortgage scheme, there is reversal in the payment stream. In other words, a senior citizen generally above the age of 60 can pledge his house with a bank or housing finance company (HFC) and get a regular periodic income/ annuity. Eligibility 1. Person should be above 60 years of age and own a home to avail the mortgage. 2. If spouse is a co-applicant, she should be above 58. 3. The loan amount is set up at around 50 to 60% of the property value. Advantages 1. Borrower along with the spouse can continue to live in the house that is mortgaged, for the rest of their lives. 2. The amount received through this scheme is considered as loan and hence there is no tax liability. 3. After the death of the borrower or in cases he moves from the house, the bank or the HFC recovers the amount by selling off the house and the extra amount, if any, will be passed on to the borrower’s heirs. Disadvantages 1.       Maximum loan available amount is Rs 50 lakhs. 2.      Maximum period is 20 years. Process The process for reverse mortgage is like the mortgagee or housing loan where the ownership of the property has to be established and required documents have to be executed with the Bank. Important points 1. The rate of interest on the reverse mortgage loan typically varies between 10% and 12%. There is a processing fee. This typically varies from 0.15 % to 1.50% of the loan amount. 2. One can prepay the loan along with the interest any time during the loan tenure. Typically, there is no pre-payment penalty. 3. In case one outlives the loan tenure, he/she will continue to live in your house. However, the lending institution may stop the monthly payments. 4. After death, the lending institution will give the first option to the legal heirs of the property to settle the loan. If they are unable to settle the loan, the lending institution will sell the property and, from its proceeds take its loan and interest and give the balanced amount to legal heirs.   To avoid any financial crunch during retirement years, taking up retirement planning earlier is always beneficial. Consult a SEBI registered investment adviser for more details.