Like many in his loan-shy generation, Abhay Mondal saved up all his working life as a government employee to build a dream house. Then, he passed away, leaving behind his widow alone at home. Their son chose to settle in Mumbai.

The struggle began when Mondal’s modest pension began to fall short of her needs. And the property they’d waited for much of their lives became a challenge to maintain.

She thought of selling it and moving to a small flat. But all along, she’d wished the house would earn for her while she owned it. Renting it out was trouble, too.

If all goes to plan, Mondal’s widow will soon have a genie that fulfils her wish. It is arriving in the form of a scheme banks and home-finance institutions are lining up for the elderly that will bring them regular monthly cheques while they continue to live in the house.

Propertt takes a peek at the future of the plan that’s called ‘reverse-mortgage’.

What is the plan?

Called ‘reverse mortgage’, it is a loan against a home that the owner does not have to pay back as long as he or she lives there. It is popular in the developed countries, especially in the US.

Why is it called ‘reverse-mortgage’?

In a regular mortgage, you take a loan from banks or housing finance companies and mortgage the property to them. You repay the loan in monthly instalments and claim the property. In a reverse-mortgage, banks and home finance companies (HFCs) pay you monthly instalments and get the property after the period of the loan is over.

Who can opt for it?

The scheme can be tailored for all age-groups, but financial institutions in India may test the waters with the elderly.

Is there an age limit?

National Housing Bank, a central government-owned institution that promotes and regulates home finance companies, may fix 62 as the minimum age.

Will NHB itself offer the product?

No. The institution does not deal with end-users (customers) like you and me. So, banks and HFCs will market it as a home-loan scheme.

How long will I get the monthly cheques?

The final word is not out, but the NHB is considering setting the period at 15 years

How will the monthly payments be decided?

Before mortgaging, the property will be assessed by independent valuers at current market prices. Other factors, such as the age and health of the borrower, prior occupation, income stream and legal aspects related to the property will also enter the calculation. However, as a thumb rule, the older an individual, the greater the chances of getting a higher monthly instalment. The logic is simple: the lender will have to pay the owner for fewer years.

What happens after 15 years?

The owner (also the person receiving the payments) and the co-owner (spouse) will be allowed to stay in the house as long as either is alive. After their death, the property will go to the bank or home finance firm that sent the cheques.

Is there a way to get the property back?

Yes, if the heir of the borrower (the home-owner) pays back the loan after his/her death.

What if the value of my property goes up during the 15-year payoff period? Will I be entitled to a higher monthly instalment?

Every five years, the asset will be revalued to factor in the appreciation or depreciation. If the valuation yields an amount over and above the payments (loan) made to the owner, the difference will be returned to the heir. But, a drop in the value of the house will result in the reduction of the instalments for the remaining 10 years.

What happens if both the owner and the co-owner pass away within 15 years?

The bank takes the property and sells it. If the money from the sale is more than the sum of the EMIs paid to the owner, the heir gets the difference.

Does revaluation help in the long run?

It does, says developer Pradip Chopra. With the property market booming, this could mean higher income streams with every revaluation. Such a clause, he adds, could prove an effective inflation-buster for the retired.

When will the scheme hit the market?

It has been sent to the Reserve Bank of India for approval, which is expected soon.