Reverse mortgage for senior homeowners: how it works, what it pays and how it is taxed

Rules and rates as of 16 October 2026.

What a reverse mortgage is

A reverse mortgage loan lets a senior citizen who owns a house turn part of its value into a regular income, without selling it and without moving out. The lender pays you, either every month or in instalments, and you pay nothing back while you live in the house. The loan, with the interest that has piled up on it, is settled only when the last surviving borrower dies, sells the house, or moves out for good.

The product was announced in the Union Budget 2007-08 and is run by banks and housing finance companies registered with the National Housing Bank (NHB). The NHB's reverse mortgage loan (RML) operational guidelines set the common rules; each lender then fixes its own amount, rate and charges within them. The RBI's own consumer FAQ on the scheme describes it as a loan meant for elderly owners who have a house but not enough income.

Who can take one

Under the NHB guidelines, the borrower must be a senior citizen of India above 60 years of age. A married couple can borrow jointly if one spouse is above 60 and the other is at least 55; the lender decides the exact criteria for couples.

The house must be:

• self-acquired and self-occupied, in India, and your permanent primary residence;
• free of any loan or charge, with clear title in your name;
• expected to last at least 20 more years (its "residual life").

Commercial property does not qualify. You must keep paying the taxes on the house and keep living in it as your main home.

How much you get, and for how long

The guidelines do not fix one loan-to-value ratio. The amount depends on the market value of the house, your age and the interest rate, and each lender sets its own figure. Two limits are fixed. First, the outstanding loan must never grow so large that your remaining equity falls below 10% of the property's value. Second, lenders are told not to count on future price rises when sizing the loan.

On payouts, the NHB guidelines cap periodic payments at ₹50,000 a month (or any other figure the Government of India notifies). A lump sum, if the lender allows one, is limited to medical treatment of the borrower, spouse or dependants, and to 50% of the total eligible loan subject to a cap of ₹15 lakh. The house has to be revalued at least once every five years, and the lender may revise your payments after that.

On tenure, the official sources do not agree. The NHB guidelines say payments may run for a maximum of 20 years, and the NHB's "About RML" page also says 20. The RBI's FAQ still says 15 years, and adds that if you outlive the loan period the payments stop but you can keep living in the house. Ask your lender which applies and get it in the sanction letter.

How much it pays: a worked example

Take a house worth ₹1 crore. Assume, purely for illustration, that the lender will let the debt reach 60% of the value (₹60 lakh) by the end of the loan, charges 9.5% a year compounded monthly, and pays out over 15 years (180 months). These are not quoted rates; your lender's will differ.

Because nothing is repaid, each monthly payout earns interest until the end. The payout P is the amount whose 180 payments, with interest, add up to ₹60 lakh:

₹60,00,000 = P × [(1 + r)ⁿ − 1] ÷ r, with r = 9.5% ÷ 12 = 0.0079167 and n = 180.

• [(1.0079167)¹⁸⁰ − 1] ÷ 0.0079167 = 395.95
• P = ₹60,00,000 ÷ 395.95 = about ₹15,153 a month
• Total paid to you over 15 years: ₹15,153 × 180 = about ₹27.28 lakh
• Interest that builds up: ₹60 lakh − ₹27.28 lakh = about ₹32.72 lakh

The debt grows slowly and then fast. On these assumptions it stands at about ₹11.58 lakh after five years, ₹30.17 lakh after ten and ₹60 lakh after fifteen. At ₹60 lakh your remaining equity is ₹40 lakh, or 40%, well above the 10% floor.

Stretch the same ₹60 lakh over 20 years (240 months) and the payout drops to about ₹8,428 a month, because more of the limit goes to interest: you receive about ₹20.23 lakh in total and interest takes about ₹39.77 lakh. Older borrowers usually get a higher percentage of value, since the expected period is shorter. Both figures are well under the ₹50,000 monthly cap.

The rules at a glance

Feature	What the official guidelines say
Age	Above 60; for a couple, one above 60 and the other at least 55
Property	Self-acquired, self-occupied primary residence in India; clear title; residual life of at least 20 years
Monthly payout cap	₹50,000 (or as notified by the Government)
Lump sum	Only for medical needs; up to 50% of eligible loan, capped at ₹15 lakh
Payment period	Up to 20 years (NHB); RBI FAQ says 15
Revaluation	At least once every 5 years
Minimum equity left	10% of property value at all times
Prepayment	Allowed any time, with no prepayment charge
Interest rate	Set by the lender; fixed or floating, disclosed upfront
Settlement window	Up to 2 months for heirs to repay or sell, as allowed

What happens when the loan ends

When the last borrower dies or moves out permanently (the guidelines treat a year of continuous absence as a typical sign), the loan falls due. The borrower's heirs have the first right to repay the loan and interest and keep the house. If they do not, the house is sold, the lender recovers its dues, and any surplus goes to the heirs. You can leave the house to someone by will, but the mortgage stays on it. A surviving spouse who is a co-borrower keeps living there and the loan is not due until he or she dies or leaves.

How the payments are taxed

The money you receive is a loan, not income, and the tax law says so in two places. Under the Income-tax Act, 2025, which replaced the 1961 Act from 1 April 2026:

• Section 70(1)(zh) lists a transfer of a capital asset "in a transaction of reverse mortgage under a scheme notified by the Central Government" among transactions not regarded as a transfer. So mortgaging your house this way does not trigger capital gains tax. This carries forward old section 47(xvi) of the 1961 Act.
• Schedule III, serial number 35 (read with section 11) keeps out of total income any amount an individual receives as a loan, in a lump sum or in instalments, in such a reverse mortgage, with no monetary limit. This carries forward old section 10(43).

The CBDT's explanatory Circular 1/2009 on the original 2008 amendment said capital gains tax arises only when the lender sells the house to recover the loan. Note the condition in both new provisions: the loan must be under a scheme notified by the Central Government. A CA can confirm that your lender's product qualifies.

Points to weigh before signing

• Interest compounds against your house every month, so the later years cost much more than the early ones.
• Payments stop at the end of the term even if you are still living there.
• Revaluation every five years can move your payout up or down.
• Talk it through with your children or heirs, since it decides what they inherit.