Reverse Mortgage…an aid for senior citizens

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image courtesy internet

image courtesy internet

Elder abuse is a term referring to any knowing, intentional or negligent act by a caregiver or any other person that causes harm or serious risk of harm to a vulnerable adult. India has maintenance and welfare senior citizens act.

Here the links to some articles that I wrote last year

https://corporatehealthtrainer.wordpress.com/2014/05/26/elder-abuse/

https://corporatehealthtrainer.wordpress.com/2014/05/21/fall-and-its-impact-on-senior-citizens/

https://corporatehealthtrainer.wordpress.com/2014/05/22/whos-senior-citizen-out-reach/

What happens in the Indian context is sometimes abuse happens unintentionally, sometimes it is perceived. In the Indian context abuse is experience as

  • Disrespect
  • Neglect
  • Verbal abuse.

Interestingly sons are perceived as perpetuators and abuse is reported by relatives. The kind of abuse and prevalence is quite different with socio-economic conditions and interestingly even religious and cultural background. Muslim community has the least leader abuse both perceived and actually as the tenets are ingrained and community steps in. Though with increasing migration syndrome there has been financial abuse, leading to the creation of an elder protection legislature.

image courtesy internet

image courtesy internet

This has come up with increased life expectancy and increased medical treatment costs. Seniors have a lack of regular income. Though Baghbaan the movie is touted as elder abuse, I would say it is rather a movie of bad financial management. Many seniors don’t live with their children.  What I notice is we a society is not really elder friendly; in the sense our cities and towns do not have spaces for the seniors to walk. Other than Hyderabad railway station getting into a train or a bus is next impossible for a senior. The sidewalks are non-existent.

But an emerging new worry is the younger flock that has migrated, very silent sells away the assets of the seniors. Lack of regular income or financial support from children causes financial crisis in seniors if they need medical aid which has become obscenely expensive in this country.

To allow the seniors a life of dignity the Union government has come up with the reverse mortgage system in 2007. This is opposite of a conventional back loan. This enables a senior citizen to receive a regular stream of income from a lender against the mortgage of his home. He continues to reside in the property till the end of his life and receives a periodic payment on it. The amount is decided upon on the basis of the demand for the property, current property prices and the conditions of the house. The bank then disburses a loan amount to the borrower in form of periodic payments after considering a margin for interest costs and price fluctuations. The periodic payments also known as reverse EMI and are received by the borrower over fixed loan tenure. With each payment whether monthly or quarterly the equity or the individuals interest in the house decreases.

The RBI of course has certain guide lines for this. The reverse mortgage loan becomes due when the last surviving borrower dies, or if the borrower chooses to sell the house. The bank first gives an option to the next of kin to settle the loan along with accumulated interest without sale of property. If the next of kin is unable to settle the loan the bank then opts to recover the same form the sale proceeds of the property.

Any residual amount after settlement of the loan with accrued interest and expenses through the sale of the property will be passed on to the legal heirs.

If the loan is prepaid then there is no prepayment penalty or charges. And the burrower is allowed to prepay it.

If the borrower outlives the tenure of the loan he can continue to stay in the house, and lending institution may however cease the monthly payments.

If one of the spouses dies the other can continue to live there only when both the partners are dead will the settlement of loan take place.

In India like everything else lengthy documentation makes the entire process tedious. And the payouts are monthly fixed amounts. There is no provision to increase this amount in the case of emergency or contingency.

indichangeThis has somehow not really become very popular in India, probably because it was marketed adequately. Also the banks have sealed off the maximum amount to 50 lakhs or 1 crore. Many times children have resentment to reverse mortgage as they see it as giving away their family home or legacy.

The Indian mind set looks at owned property as a family asset and usually becomes an inheritance, and liquidating it would the last resort.  Again elders are given lot of importance in the Indian cultural context so property owning senior citizens are generally assured of care and support in their golden years.

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