Retired Professor M.R. Santhanam (74) wanted to avail himeself of a reverse mortgage loan a year ago. He is yet to take a decision.
“The loan offered by the bank was low. My house is worth Rs.1 crore. But they offered 15 per cent of the value as the reverse mortgage loan. This is far below my expectation,” he said.
“I do find reverse mortgage fairly attractive. But I am looking forward to some more favourable terms,” he said.
Some of the banks offer reverse mortgage loan up to 20 per cent of the value of the house. V. Kannan, another senior citizen, said: “Increase in the loan component will attract more people like me.”
Some of the senior citizens end up mortgaging their property at a higher rate of interest after they are not able to get the required loan amount under the reverse mortgage scheme, said officials. They stressed the need for further modification of aspects such as the age difference of the couple that seek the loan.
Most of the banks which offer the reverse mortgage loan in the city are declaring a dip in the number of reverse mortgage loans disbursed in the past one year. According to a public sector bank official, only seven senior citizens were given reverse mortgage loans in the city last year by the bank.
C.A. Jaya Senan (81), who sought a reverse mortgage loan last year, was not able to get it. “This is a good scheme. But officials of a bank did not give me an answer. I was not able to get the loan.”
“Banks officials show reluctance to speak to us,” said K. Krishnan, another customer who could not avail the loan.
Bank officials said that many senior citizens who sought reverse mortgage loans did not understand that the scheme was introduced as a social security measure and to help people in need. Many people seek reverse mortgage to rebuild their old house, said an official of a public sector bank. Many senior citizens did not fulfil conditions such as self-acquired property, self-occupied and a registered will in favour of the bank, the official added.
State Bank of India has been encouraging reverse mortgage loans to help senior citizens, according to its officials.
However, in the current fiscal only 59 borrowers have availed Rs.5.83 crore in Chennai. The total number of reverse mortgage loans sanctioned by the bank in Chennai since the launch of the scheme is 509 amounting to Rs.50.31 crore.
The actual aim of the scheme is to help senior citizens who have typically locked in a bulk of their savings in a house or property. The loan would help them raise money without selling or vacating their house during their lifetime.
Efforts are on to make reverse mortgage loan more appealing. Insurance companies are in talks with banks to offer an annuity cover with reverse mortgage.
An insurer has recently tied up with Central Bank of India and is in talks with other banks and housing finance companies.
“We have waited for a year. We are waiting for things to get more attractive,” said Mr. Santhanam.