Introduced by the union government in 2007, the Reverse Mortgage Scheme enables a senior citizen to mortgage their house or property to a lender, who then makes periodic payment to the borrower. The lender could include a bank or a financial institution. The borrower continues to reside in his house till the end of his life, and receives a periodic payment for it. The borrower is not required to service the loan in his lifetime and does not need to pay principal and interest to the lender every month. After the borrower dies, or leaves his property permanently, the loan is repaid along with interest, by the sale of property.
The purpose of this scheme is to provide a source of regular income for senior citizens in the form of monthly payout or combination of monthly payout.