More senior citizens can now live in their homes and earn from that too. In a move that will go a long way in making life easier for the aged, the Union Budget proposes to facilitate reverse mortgages for them. The National Housing Bank (NHB) will refinance home financing companies which offer this product.

Traditionally, a reverse mortgage allows a person to mortgage his house to a bank or housing finance institution.

The bank does a valuation of the house and on the basis of that, pays the owner an equated monthly installment (EMI). So, typically, the person or his spouse can continue to live in the house till they pass away after which, the house becomes the property of the bank.

Says R V Verma, executive director, NHB, "The move will help people who find it difficult to get a personal and home loan." While normally, the reverse mortgage stays in effect till the person or spouse passes away, there are agreements that are flexible in nature and where the valuation of the house is done periodically.

"So the EMI could go down or the number of years of the contract may come down if there are any changes in the value. The bottom line is that the value of the house should always exceed the loan amount," points out Verma.

Experts say, citizens opting for a reverse mortgage need to make their agreements foolproof at the time of signing them, especially with regard to interest rate changes and the tenure for which the EMI is to be paid by the FI.

They need to ensure that the tenure is long enough to cover their life span.<hr>

Earn EMIs

• Reverse Mortgage allows seniors citizens to unlock the value of their house by mortgaging it with a bank/HFC/other financial institutions
• One earns a monthly income from the bank payments till the person lives.