What is Reverse Mortgage?
Background
A Reverse Mortgage Loan (RML) is the mirror image of a home loan: instead of you paying the bank every month to buy a house, the bank pays you every month against a house you already own outright. It's built for retirees who are house-rich but cash-poor — asset-heavy on paper, but without enough liquid income to cover monthly expenses — and lets them stay in the home while drawing an income from it.
Explanation
You need to be 60+ (spouse can be co-borrower from 55+) and own the property free of any existing loan; it must be your self-occupied primary residence, not a second home or investment property. Banks typically lend up to ~60% of the appraised property value, disbursed as a monthly, quarterly, or lump-sum payout, with interest accruing on the outstanding balance each month rather than being paid by you — so the loan balance grows over time instead of shrinking, the opposite of a normal mortgage. There's no repayment obligation during your lifetime and no risk of eviction for missed payments, because there are none to miss; the loan tenure is typically capped around 15–20 years by most lenders, after which payouts stop even though you can continue living in the house. The amount you receive is treated as a loan, not income, so it isn't taxable. When you (and your spouse, if a co-borrower) pass away or permanently vacate, your heirs get the first right to settle the outstanding loan and interest and keep the house; if they don't, the lender sells the property, recovers what's owed, and pays any surplus to your heirs.
Example
A 70-year-old in a mortgage-free ₹1 crore home with limited liquid savings might access ~60% of value (₹60 lakh) as the loan base, disbursed over a 15-year tenure — working out to roughly ₹25,000–₹35,000/month depending on the lender's interest rate and payout structure, on top of untaxed status. Because interest compounds against the property rather than your cash flow, RML tends to make the most sense as a supplement alongside a pension/SWP/EPF income stream, not as your only income source — and it's worth comparing against simply downsizing (selling and moving to a smaller home), which unlocks the same equity without the compounding-interest structure. See SCSS and SWP for other regular-income options in retirement.
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