Definition
Reverse Mortgage
A reverse mortgage lets a senior citizen who owns a home borrow against its value, receiving payments from the lender while continuing to live in the house.
Instead of the homeowner paying the bank, the bank pays the homeowner — as periodic instalments or a lump sum — turning home equity into income without forcing a sale. The loan, plus interest, is typically repaid from the sale of the property after the borrower's death or permanent move-out, often by the heirs who may choose to settle it and keep the home.
In India, reverse mortgages are aimed at asset-rich but cash-poor retirees and remain relatively uncommon. They can supplement retirement income and address longevity risk, but borrowers should understand the interest accrual, the impact on inheritance, and the conditions under which the loan becomes due.
Related terms
- Retirement CorpusA retirement corpus is the total lump sum you need to have accumulated by retirement to fund your living expenses for the rest of your life.
- Longevity RiskLongevity risk is the risk of outliving your savings — that you live longer than your retirement corpus was designed to support.
- Home Loan Tax BenefitsHome loan tax benefits are deductions Indian taxpayers can claim on the principal and interest paid on a housing loan, reducing taxable income under the old tax regime.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.