It’s an unspoken truth. Elders owning a residential house can take route of ‘Reverse Mortgage Loan Scheme’ to fund their expenses & maintain respectability in their family.
Street Talk
Expert Opinion
All of us, whether rich or poor, in one way or the other traverse life at some point of time in misery and poverty. We as poor are desperate for our survival, while being rich makes us suffer fear syndrome of losing wealth. If we have power we remain panicked by potential instability. There are innumerable stories of rich people, most of them untold, who turned out to be poor when some misery or unforeseen situation knocked them down at the later stage of their life.
In the context of our place (J&K), culturally speaking, our elders at the fag end of their life had no fear of insecurity because of the social setup which had always reserved huge space for their comfort. Now this is a thing of the past. Let me be blunt in my statement that J&K over a period of the last three decades has been plagued by social disorder. The kind of violence and waywardness observed during the said period impacted the social fabric of cross section of societies at grass-root level. Even as there are innumerable areas which speak about growing social disorder, it’s the elder abuse in J&K which has emerged as a never-seen-before painful reality. Social media platforms remain flooded with stories about elder abuse. It is now very common to come across shocking tales of elderly family members subjected to neglect, abuse, and even abandonment at the hands of their own family.
Here, the national statistical scenario about elder abuse quoted by various media outlets merits a mention. These troubling statistics reveal the harsh reality of elderly abuse in India. According to a survey, more than 50% of the elderly people in India have reported abuse. More than 75% of elderly people have reported that their abusers lived with them. The survey also showed that disrespect was the biggest form of abuse that elderly people faced – nearly 60% of cases reported the same.
In the context of J&K I didn’t come across any survey on elder abuse. But the kind of cases happening in the region far and wide reveals that all is not well with most of our elderly population. I think the elder abuse has already beaten the national statistics.
Precisely, over a period of time the comfort space in families for elders stands squeezed when we compare it with what used to be in the past, and the comfort zone continues to shrink for them. The problem for most of them is unique. Despite owning a house property, they remain financially poor owing to lack of regular income to meet their day to day needs. In other words, it’s the financial insecurity which today remains a major concern for the elderly population.
Actually, getting old without any proper financial backup/resources to meet day to day expenses can be upsetting. With the rising cost of living and no regular income at old age can turn problematic. For an old aged person, the ideal situation would be to get a regular income flow without having to do any job. But how is it possible?
Let me reproduce the plight of an elderly healthy man hailing from one of the J&Ks posh areas, which I shared some time back in one of my columns. He was owner of a three-storeyed residential house, having no dependents. Despite being the owner of the property, he lacked financial resources to meet his day-to-day expenses. Left out alone at home, a serious illness to his spouse left him wandering for financial support. An acquaintance had told him about a loan scheme offered by banks to get his living expenses funded and at the same time help him to negotiate treatment expenses for his spouse.
Normally a loan is given to a person who has regular income and capacity to repay the loan. So, how was it possible for the elderly person to get a loan that too when he was having no source of income? What’s this kind of loan?
Of course, there is a loan scheme for elders where they are not asked for any income proof or reason for obtaining the loan. It’s called ‘Reverse Mortgage Loan Scheme’. The scheme was announced in the Budget of 2007-2008 for elders being owners of houses to avail loan.
So, this made him think of availing the facility to generate a regular cash flow to meet not only his day to day requirements, but also go for specialized treatment of his ailing spouse.
But the elderly man was disappointed when he found that the banks operating in J&K didn’t offer a Reverse Mortgage scheme. Even though some nationalized banks do have such a scheme in place, they don’t evince any interest in selling this product in J&K.
What exactly is this Reverse Mortgage scheme?
This scheme is exclusively for elders/senior citizens who own a house property. This scheme is actually to help them to supplement their income. They are required to mortgage their house with a bank. The bank determines the value of the house and agrees to provide a reverse mortgage loan. It is usually up to 60-80 percent of the appraised value, depending on the bank’s policy as well as the property’s resale value.
The bank provides the amount to the borrower in monthly instalments. The bank makes payments to the borrower/borrowers (in case of a living spouse) against the mortgage of the residential property.
Upon the death of the borrower, his/her legal heirs have the option of buying back the property at the bank-determined value, else the bank will take possession and sell the property in an auction.
Who is eligible to take advantage of this loan scheme?
Some of the key eligibility criteria include that the senior citizen/elder must be at least 60 years old. In case of joint application with spouse, the age of the spouse must be at least 55 years. There is no upper age limit to apply for this loan.
The most important thing is that the elder person must have self-owned property that does not have any outstanding loans or other dues. The person must be residing in the house against which the loan is going to be granted.
When we look at the benefits of the scheme, the borrower is not required to repay the loan. You do not need to repay the loan after the tenure ends. Repayment is required to retain ownership of the property only if the borrower decides to sell the property or decide to move out of the property permanently. Notably, the bank does not require the borrower to vacate the property even after the loan tenure is completed and monthly payments from the bank have stopped.
There is no Income Tax or Capital Gains Tax applicable on the payouts. Besides, the borrower has the flexibility to use the funds in his own way and the bank won’t impose any restrictions on the use of the money. Even, the money received through this loan scheme can be used by the borrower for renovation/extension of the property, but for this he/she has to take the permission of the bank.
Notably, elders by raising funds for their use through the Reverse Mortgage Scheme won’t lose ownership of their house property. The ownership still remains with them. However, all expenses related to maintenance and upkeep of the property as well as charges such as property taxes, stamp duty, and home insurance have to be paid by the borrowers.
Precisely, Reverse Mortgage is a financial tool which paves way for a ‘house rich but cash poor’ elders to get money against the future value of the house and then they needn’t pay back until he sells the home or dies.
To conclude, there is no denying the fact that elderly people are the backbone of our family and society. They have taught us how to be better people, and are a great source of inspiration for the present generation. They have given us so much – their insight, their patience, and their affection – and they deserve all the respect and love they can get. To be precise, our elders are the treasure of wisdom, pillars of families, role models and nurturers of culture and tradition.
Meanwhile, banks operating in the J&K region need to give a try to the Reverse Mortgage Scheme. The features of the scheme can be sewed as per the given social set-up. Here the ‘house rich but cash poor’ elder population caught in the whirlpool of growing social disorder would save themselves from the neglect, abuse, and even abandonment at the hands of their family members.
(The author is a veteran journalist/columnist. He is former Head of Corporate Communication & CSR and Internal Communication & Knowledge Management Departments of J&K Bank)