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Why Reverse Mortgage is not Popular in India



If you are a senior citizen above 60 years and worried about your savings getting exhausted, your home can be a source of your livelihood. If you are above 60 years of age and own a house, you can avail a loan against it (You are still the owner of the house), with a bank or a housing finance Company. The bank gives you money in installments each month or as a single lump sum which you can live on. After your and spouses death the heirs (Children or family), can take possession of the property after clearing the pending dues on the house. ( Borrowings + interest).

Why reverse mortgage is not popular in India?

Culture and tradition:
In India the tradition is to hand over property from one generation to another. Handing over property is considered to be family honor and pride. No parent would want to pass on a debt (loan) as a legacy to his children.

Families truly care:
In India children look after their parents. Children send money to parents when they are in need. No child would want to leave his parents so helpless, that they would need to avail reverse mortgage.(Mortgage the family home).

Lack of understanding:
Reverse mortgage is not properly understood in India. It is regarded as a complex product by senior citizens in India. This makes it highly unpopular among them. Many senior citizens are not even aware that such a product is in existence because it is poorly marketed.

Indian’s save:
Indians tend to save for retirement. They save money for their retired years in their youth. Senior citizens in India live on their savings and rarely spend heavily in their old age. The savings tend to be enough in their old age.

Emotions:
A house is an asset valued more than money. It has emotions attached to it. Senior citizens would not like the idea of even pledging their house for money. Senior citizens fear that if something goes wrong they could lose the house.

Tedious procedure:
The documentation for a reverse mortgage is regarded by senior citizens as quite tedious. Senior citizens would not like to go through the lengthy documentation of the bank. They regard this as a hassle worth avoiding.

Fluctuating interest rates:
Interest rates on the reverse mortgage tend to be high. If the interest rates change (increase), then the senior citizens will be stuck with a loan of very high interest rate. The heirs (Children) will have to pay a huge amount to secure the release of the house.

You cannot rent the property:
If you avail reverse mortgage you cannot give your house/property on rent. You and spouse have to reside on this property and it cannot be rented out even partially.This means you cannot get money by giving your house on rent and this is a loss to you.If you move out of the house you will have to pay the entire reverse mortgage amount (Borrowings + interest).All these means reverse mortgage is not popular in India.

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