Quoted (Outlook Money) – Reverse Mortgage should be Last Resort for Senior Citizens

I was recently quoted in Outlook India Money in an article about Who Should Take A Reverse Mortgage Loan (RML)?

Here is the quote from the article (link):

Dev Ashish, a Sebi registered investment advisor and founder of Stable Investor, a financial planning company, says if a senior citizen has two houses, it is better to sell one instead of taking a reverse mortgage. However, selling a home has its own challenges.

Still, RML should be the last resort. Ashish suggests that suppose a person received Rs 1 crore (post-taxes) after selling a house and purchases an annuity plan for Rs 50 lakh at a 6 per cent interest rate, and he could earn Rs 25,000 monthly for the rest of his life. Then, he can invest the remaining amount elsewhere.

So, a reverse mortgage may not be a good option if the homeowner needs a stable retirement income and has a suitable buyer for his second house. But if he finds it hard to sell the house, then a reverse mortgage would make sense.

You can compare the above example and numbers, with the following – a leading PSU on its website explains that suppose the bank offers the applicant Rs 80 lakh in a reverse mortgage loan for a 15-year tenure, with a 10 per cent interest per annum. He will receive a monthly payment of Rs 19,302. So after 15 years, the bank would have paid Rs 34,74,360 (Rs 19,302 x 180 months). The difference between the loan amount and the actual amount paid is the interest amount.

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