News - A loan instead of a pension

About the 'reverse mortgage' Instead of raising pensions, the Government offers pensioners a way to improve their lives by mortgaging their property in banks. Suren Tovmasyan, the head of the Cadastre Committee, has presented the 'reverse mortgage' bill during the 2026 budget discussions. This is yet another bill that stems from the Government's policy to turn real estate into capital and thus to 'activate the financial system'. "The pensioner will be able to apply to a bank, his property will be appraised, he will receive a monthly amount that will be credited to his pension, and he will have broader opportunities to organize his life, for example — to travel," said Tovmasyan at the National Assembly. The institution called 'reverse mortgage' uses the word 'mortgage' as a euphemism: if in a mortgage loan the borrower obtains property, then in a 'reverse mortgage' the borrower (and his heirs) lose the property they own. According to the bill, after the pensioner's death the mortgaged house will be owned and controlled by the bank. If the bank sells the house at a high price and, after repaying the loan, there is money left, the surplus must be transferred to the rightful heirs of the owner pensioner. If the pensioner's children or heirs want to keep the house, they must within six months repay the entire loan and buy back the property from the bank, which would have become inheritance. Attorney Tigran Muradyan told Epress.am that such transactions pose a risk of exploiting the elderly. Any contract entered by a pensioner tied to real estate must be supervised by guardianship and trusteeship bodies, and protective mechanisms must be ensured. In practice, these bodies handle mainly matters related to the care of children: for example, in divorces they decide whether the child should be entrusted to the father or the mother. But they should also consider issues of protecting the elderly, including their guardians. "There is a dire situation in the real estate sector even without this new law. Because of loans, people constantly lose their homes. Mortgaged houses are sold through the Enforcement Service at below-market prices. To ease the situation, the Government has stated that when selling the debtor's 'only dwelling' they must be given at least 4.9 million drams. That is not enough to buy a home," Muradyan said. According to attorney Muradyan, the 'reverse mortgage' instrument is an improvement on an already existing law, under which the social security of the elderly is addressed by capitalizing their property. The Civil Code already contains the institute of a 'rental contract'. By signing a 'rental contract', an elderly owner passes his house to the person who undertakes to take care of him for life. But notaries do not like to sign this type of contract and very often guide elderly applicants to simply formalize a 'donation', saying "well, you will settle the rest of it between yourselves". "I have a client, whose granddaughter promised to take care of her on the condition that she would get the house. The grandmother signed a contract, the granddaughter evicted the grandmother from the house, gave her a half-ruined dwelling, and put the house up for sale. If the granddaughter does such things, what guarantee is there that the bank and the intermediary won't do the same...", Muradyan said. The bill's justification states that this mechanism is widely used in several developed countries — the United States, the United Kingdom, Canada. In those countries too, 'reverse mortgages' have created major problems. In the United States, for example, banks offering reverse mortgages have left thousands of people homeless, cheated them, and embroiled them in lawsuits. There are lawsuits against such lending companies, for example for dishonest marketing to induce elderly people to sign contracts, for raising interest rates year after year, and for not explaining the terms. In the United States, home equity loans are arranged with the expectation that the elderly owner will die early. If, for example, he does not die within 15–20 years, the loan's interest increases with age, sometimes resulting in a debt that cannot be repaid even by selling the house. In the United States, a 'reverse mortgage' also strains family relationships: for example, children, knowing they will be disinherited, feel alienated from their parents.