Reverse mortgage

An ordinary mortgage lends you a lump sum and you repay it in EMIs. A reverse mortgage runs the film backwards: the property is pledged and the lender pays you.

The workbook is careful about when this belongs in a plan. For most Indian households the self-occupied home is the largest single asset and produces no income at all. The reverse mortgage turns it into income in the extreme situation of the retirement corpus being inadequate — not as a first resort.

The borrower remains the owner, does not service the loan during their lifetime, and continues to live in the house.

Eligibility. An Indian citizen aged 60 or more. A married couple may borrow jointly, at the lender's discretion, provided one is above 60 and the other not below 55. The property must be a residential house or flat in India, with clear title, free of encumbrances, used as the permanent primary residence, with a residual life of at least 20 years. There is no minimum period of ownership. Commercial property does not qualify.

How much. The loan depends on the age of the borrower, the appraised value of the house and the lender's prevailing interest rates.

Caps.

Payout frequency is the borrower's choice — monthly, quarterly, annual or lump sum — and may be changed at any point.

Tax. All receipts under an RML are exempt from income tax under the corresponding entry of Schedule II of the Income-tax Act, 2025 (the exemption earlier available under section 10(43) of the 1961 Act).

When it ends. Disbursements stop at the end of the tenure, but interest continues to accrue and the loan becomes payable only on a trigger event: death of the last surviving borrower, the borrower(s) permanently moving out, or sale of the property. It is settled from the sale proceeds, and anything left over goes to the borrower or the heirs — who may instead repay from other resources and keep the house. Prepayment is allowed at any time without penalty.

RMLEA. The Reverse Mortgage Loan Enabled Annuity converts the loan into a lifetime annuity bought from an insurance company. The National Housing Bank's operational guidelines set the loan-to-value ratio: it starts at 60 per cent for ages 60 to 70 and rises to 75 per cent for age 80 and above. The borrower chooses between a lifetime annuity with or without return of purchase price, may cover the spouse, and the annuity received is exempt from tax.

A 65-year-old widower owns his flat outright. It is appraised at Rs 1.2 crore. His retirement corpus is running down and he does not want to sell and move.

Sizing the loan. Using the NHB loan-to-value ratio the workbook gives for the RMLEA — 60 per cent for ages 60 to 70:

Eligible loan = 60% × 1,20,00,000 = Rs 72,00,000

Taking part as a lump sum. He needs money for surgery. The lump sum is capped at 50 per cent of the eligible loan, subject to an absolute ceiling:

50% of 72,00,000 = Rs 36,00,000
Absolute cap                = Rs 15,00,000   ← the cap binds
Balance for periodic payment = Rs 57,00,000

Spreading the balance over the maximum tenure.

57,00,000 ÷ (20 × 12) = Rs 23,750 a month

Comfortably under the Rs 50,000 monthly ceiling — and entirely tax free in his hands, which is what makes Rs 23,750 of RML receipts worth more than Rs 23,750 of interest income from a deposit. (The straight division is illustrative: the workbook says the lender computes the entitlement from age, appraised value and prevailing interest rates.)

What happens at 85. Disbursements stop at the end of the 20-year tenure. He keeps living in the flat, owns it, and pays nothing — but interest has been accruing on Rs 72 lakh of drawings for twenty years. The debt falls due only when he dies, moves out permanently or sells. His heirs may then repay it from other resources and keep the flat, or let it be sold and take whatever remains.

Chapter 6, section 6.2.3, sets out the reverse mortgage as a lettered list of features — which is how it will be examined. Chapter 3, section 3.5, and Chapter 8 present it as one of the remedies for inadequate retirement income, alongside postponing retirement, a second career and cutting discretionary spending. Expect direct recall of the age criteria including the 55-year spouse rule, the Rs 50,000 and Rs 15 lakh caps, the 20-year tenure and residual-life conditions, the trigger events, and the tax exemption on receipts.

• Two different 20-year numbers. The maximum loan tenure is 20 years and the property must have a residual life of at least 20 years. They are unrelated conditions and questions mix them.
• Payments stopping is not the loan falling due. Disbursements cease at the end of the tenure; interest keeps accruing and repayment is triggered only by death of the last borrower, permanent departure, or sale.
• The Rs 15 lakh lump sum is purpose-restricted. It is for medical treatment of self, spouse and dependents — and it is the lower of 50 per cent of the eligible loan and Rs 15 lakh.
• The borrower does not lose ownership. Title stays with the borrower, who need not service the loan while living in the property as primary residence.
• Commercial property is excluded, and the residence must be the permanent primary residence — not a second home or a let property.
• The couple rule is asymmetric: at least one borrower above 60, the other not below 55, and joint eligibility is at the lender's discretion.
• The RMLEA is a different product from the plain RML. It buys a lifetime annuity with the loan proceeds, and the NHB loan-to-value ladder (60 per cent at 60-70, up to 75 per cent at 80 and above) belongs to the RMLEA guidelines.