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Our Bureau

Mortgage guarantee companies would be set up says Chidambaram

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Chennai Feb. 28 The Budget proposal regarding a reverse mortgage product to be introduced by National Housing Bank will provide an avenue for Senior citizens to extract value out of their property without selling it off.

A "reverse mortgage" product is one where a senior citizen can mortgage his or her property and receive either a lump sum or regular instalments from the lender. This can be either for a fixed period or until the time the senior citizen dies.

After the fixed period or the demise of the senior citizen, the bank or the lender gets to recover its "loan", by selling the property.

This method of helping the elderly meet their living expenses is said to be very popular in the US and UK.

Mortgage Guarantee

The Finance Minister has said that steps would be taken to set up mortgage guarantee companies. This move is expected to benefit banks and housing finance companies, by providing them a greater degree of comfort.

The move appears to be a tacit acknowledgement of the rising degree of risks faced by home loan lenders.

For long, home loans were considered the safest form of lending with non-performing assets at less than 1 per cent in this sector. "No one will default on their home loan" was the refrain of lenders. Perhaps that is now changing.

More Stories on : Budget | Housing Finance | Mortgage | Real Estate & Construction

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Reverse mortgage of property to help senior citizens

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