ON MORTGAGE AND REVERSE MORTGAGE

BY SUNNDEEP CHOPRA

A ‘mortgage’ has come to be defined as the transfer of an interest in property (or the equivalent in law-a charge) to a lender as a security for a debt. While a mortgage is quintessentially not a debt, it is the lender’s security for a debt. In simpler words, a mortgage can be understood as a security for the loan that the lender makes to the borrower.

Mortgages are strongly identified or then associated with loans secured on real estate and indeed come as a boon to realtors who can raise the desired sums of money by pledging a part of their vast land portfolio and the widely prevalent practice of only mortgaging land in most parts of this vast country makes their task that much easier.

The reverse mortgage scheme that has come to be offered by most of India’s leading banks in recent times has indeed come as manna from heaven in the case of senior citizens who have access to either a tract of land, personal property or then a house of their own as the same can now net them a regular income till their last breath.

The concept is very simple and easy to understand, a senior citizen who owns or holds either a house or property, but lacks a regular and stable source of income mortgages his property based on the banks assessment of it’s worth and the bank in turn begins to pay the person concerned a regular payment which continues till his/her last breath.

What makes the above mentioned scheme even more alluring or enticing is the fact that the person can continue to reside in the mortgaged house throughout his/her life span and will not be evicted under any circumstances. The bank however abrogates unto itself the right to dispose of the property/house in question after the demise of the senior citizen and any excess amount left over form the sale of the property at the then prevalent market rates is duly disbursed amongst the legal heirs.

Primarily known as the Housing Finance Industry, the net worth of the mortgage financing industry within India has been estimated at 18 billion US dollars. A significant though belated change in the structure and functioning of the mortgage industry has come to define it in recent years.