PRODUCT ANALYSIS: Yet another reverse mortgage product for the elderly, which they can opt for, only in dire need.

Since the last two years, a large number of banks and financial institutions have introduced the reverse mortgage product for the elderly.

This product is supposed to help senior citizens, who want to unlock the value of their house, by mortgaging it to a bank for a monthly payment. In other words, it is an option for the asset-rich, yet cash-insufficient, to meet regular expenses and increased healthcare requirements.

This product was first launched by Dewan Housing in mid-2006. However, after the announcement in Budget 2007-08, a large number of banks such as, Punjab National Bank, State Bank of India and Axis Bank have launched them. The latest to join this list is Union Bank of India (UBI), which has launched it recently.

The basic criteria is that citizens should be 60 years old and above to opt for this product. Also, monthly instalments for a maximum of 15 years would be paid to them for mortgaging their self-occupied residential property.

However, there are some conditions. For one, the residual life of the property should be at least 20 years. Also, the property will be valued after keeping a margin of 30 per cent on the assessed value of the property.

This means a property worth Rs 70 lakh will be valued at Rs 49 lakh. Accordingly, the payout will be Rs 11,222 per month for 15 years.