India senior citizens are gradually looking at reverse mortgage loan scheme for their financial needs. But according to some senior citizen banks are not offering good value of their property.
One of the senior citizen, retired professor M.R. Santhanam (74) a year ago had decided to avail a reverse mortgage loan but with held his decision. He said, “The loan offered by the bank was low. My house is worth Rs.1 crore. But they offered 15 per cent of the value as the reverse mortgage loan. This is far below my expectation.”
He added, “I do find reverse mortgage fairly attractive. But I am looking forward to some more favorable terms”.
There are some banks that are offering mortgage loan up to 20 per cent of the value of the house. Another citizen V. Kannan said, “Increase in the loan component will attract more people like me.”
Bank officials said some of the senior citizens choose to mortgage their property at a higher rate of interest when they are not able to get the required loan amount under the reverse mortgage scheme. They said in some of the aspects further modification is required such as the age difference of the couple that seek the loan.
Most of the banks which are offering the reverse mortgage loan have reported decline in the number of reverse mortgage loans disburse in the past one year. A public sector bank official said, last year in the city, reverse mortgage loans were given to only seven senior citizens.
C.A. Jaya Senan (81), who applied for a reverse mortgage loan last year, did not get it. “This is a good scheme. But officials of a bank did not give me an answer. I was not able to get the loan.”
K. Krishnan, another customer who could not avail the loan said, “Banks officials show reluctance to speak to us.”
Bank officials stated many senior citizens who want to take reverse mortgage loans do not understand that the scheme has been introduced as a social security measure and to help people in need. An official of a public sector bank pointed out that many people want to take reverse mortgage to rebuild their old house. The official added, many senior citizens did not fulfill conditions such as self-acquired property, self-occupied and a registered will in favor of the bank.
According to State Bank of India officials, the bank has been encouraging reverse mortgage loans to help senior citizens.
In Chennai, in the current fiscal loan of Rs.5.83 crore has been sanctioned to only 59 borrowers. Since the launch of the scheme in Chennai bank has sanctioned 509 reverse mortgage loans amounting to Rs.50.31 crore.
The main aim of the scheme is to help senior citizens who normally invest their bulk of savings in a house or property. The loan helps them raise money without selling or vacating their house during their lifetime.
The ways are being searched to make reverse mortgage loan more appealing. Insurance companies and banks are having talks to offer an annuity cover with reverse mortgage.
Recently one of the insurance companies has tied up with Central Bank of India and is having discussions with other banks and housing finance companies.
Mr. Santhanam said, “We have waited for a year. We are waiting for things to get more attractive.”
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