This form of mortgage unlocks the revenue potential of a house for senior citizens
A mortgage is a form of hypothecation of a property to a banks or housing finance company as a security for a loan. A common form of security banks insist on is a mortgage of the house for which the loan is being availed of by the borrower.

Mortgage is the transfer of interest in a specific property to secure the payment of money advanced. The transferor is called a mortgagor, the transferee a mortgagee, the principal money and interest secured are called the mortgage money, and the instrument by which the transfer is effected is called a mortgage deed.

In case of a reverse mortgage, the property owner surrenders the title of the property to a financial entity. The financial entity doesn't pay the entire amount to the owner upfront. On the contrary, it pays out a regular sum each month for the agreed time. The owner gets to stay in the property along with his spouse for their lifetime. Thus, the owner can ensure a regular cash flow in times of need and enjoy the benefit of staying in the property. After the owner's death, the property is transferred to the institution, and not to the heirs. Reverse mortgage is a relatively new concept in India. The concept is quite popular in developed countries to generate cash flow.

The arrangement will be available to those above a specific age, for example, 60-65 years. The aim is to turn the immovable property into a 'liquid' asset that generates a return while it is used by the owner. The amount paid out each month is for a specific period of time. The financing institution has to bear the risk of the individual outliving the agreement. At the expiry of the agreement period, the monthly payments to the owner stop.

The monthly payout depends on the value of the property, terms of the agreement and the rate of payment. The valuation of the property is to be done by professionals. The entire payout mechanism - calculation and computation - depends on the law of probability.

On the death of the owner, the spouse can continue living on the premises. Only in case both the husband and wife die during the tenure of the scheme, the institution will sell the property, take its share as per the terms and distribute the rest among the heirs.

As a concept, reverse mortgage is of immense use in unlocking the otherwise illiquid asset. Hitherto, immovable property was treated as one of the most illiquid assets. Reverse mortgage tends to unlock the liquidity potential of this asset. It helps the owner get a decent return from his immovable property, without having to part with it. The owner can continue to be in possession of the property during his lifetime