I suggested reverse mortgage this time

IW12_RETIRE01_655412fIt was almost 8, raining outside. I was planning to pull down the shutters of my office, when the door opened and an old man walked in. He was in a white shirt and grey trousers. How old is he…65 may be.

‘Hello sir, what can I do for you?’ I asked. He stared for a second and asked, ‘Are you Mr. Chandra?’ ‘Yes..’. ‘I am Ramesh. I have heard about you from my friend and hence I have come to you for some financial advice today.’

‘See I don’t have much money and I’m just 4 years from my retirement. Once I am out all I will have is a monthly income of 10000/- and a house worth 20 million rupees (2 crores). I really don’t know how I am going to manage after my salary stops.’

Till now I was listening quietly. The 20 million rupees house rang a bell! ‘Why don’t you go for a reverse mortgage? See, you can easily opt for a reverse mortgage loan enabled annuity. The bank will give you a loan of around 60% of your property value. So..that will be what..1,20,00,000 ? The bank will then buy you an annuity with this money. This way you can get a fixed monthly income.’

His eyes were suddenly bright. ‘But what about my son? He will not have a place to live in after I die.’

‘Oh don’t worry Mr. Ramesh you can even buy an annuity with return of purchase price. Of course the monthly payment will be lower, but at least it will be easier for your son to repay the loan and repossess the house after your lifetime.’

Hmm, sounds like a good idea. He pushed the chair back, got up and gave me 300 bucks. ‘Well Mr. Chandra, you don’t know how much relieved I am now. You are really great’, and he walked out. 

If you are in similar situation you can also try the same. Just consult a financial expert regarding your specific needs before you proceed.

Photo Courtesy: The Hindu Business Line