Click to play videoNew Delhi: The Finance Minister’s proposal of reverse mortgage, which allows senior citizens to mortgage their house, get a loan, and continue to live in it all at the same time is being met with cheer.
The 800 sq feet house in Pancheel park in South Delhi is a priceless asset. But its owner – 85-year-old MM Sabarwal – doesn't think so.
“Lots of people tell me this house is worth crores. To me it’s a liability to maintain it, to make sure it’s in a good state. Where will the money come from?” Sabarwal said.
This former corporate honcho, widowed and childless, is one of many senior citizens who's problems have been finally addressed with the Revrse mortgage scheme that finally came into effect this budget.
This means the individuals, above the age of 62 with a limited income, can now pledge their house to a bank for a loan that they'll receive while still living in the house.
“As you advance in age – health problems, insecurity, income recedes when you retire – this is a boon for us. Have asset like a house, can borrow money against it and don't have to worry about paying it pack – can be recovered after my demise,” said Sabarwal.
So this is how it works – when the person passes away, banks would recover the loan and interest after selling the house and pass on the rest of the amount to an heir or anybody the individual identifies.
The loan amount would be fixed after assessing the value of the property and the person's age. For now the loan period at 15 years
In India, most parents would want their children to inherit their houses even if they have to compromise on their freedom. But this may be a boon for many senior citizens who are childless. Chidambaram may have given them an option to hold their head high in the autumn of life.
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