New Mortgage Mechanism in Armenia: Details

On May 18, during a meeting of the permanent committee on financial credit and budgetary issues in the National Assembly, Nane Ghazaryan, the deputy chair of the Cadastre Committee, announced the necessity of introducing the "reverse mortgage" institution in Armenia. This was discussed in the context of a package of bills proposing amendments and additions to the Civil Code and related laws.

According to the deputy chair, the mechanism to be introduced pertains to the monetization of properties owned by elderly individuals. A pensioner who owns a property can mortgage it at a bank while remaining the owner and retaining the right to live there. In return, the financial institution will pay them a monthly sum for the rest of their life, after which the mortgage will be considered settled, and the credit organization will take possession of the property.

As part of the process, the pensioner must invite an independent appraiser to determine the market value of the property, after which the state is obliged to verify the assessment's authenticity, and only afterward may the property be offered to the bank as collateral. This will allow the elderly to avoid selling their property, not having to relocate due to social issues, continue living in their home, and receive a lifetime rent.

In parallel with the "reverse mortgage" institution, it is also planned to establish the "exclusive rights of the spouse" institution. It was noted that most citizens of pension age who own real estate continue to live on limited incomes amid rising utility costs, housing, and daily living expenses.

The legislative package is expected to grant pensioners aged 63 and above the right to negotiate with commercial banks under legislatively defined conditions to participate in the "reverse mortgage" program. The elderly will be able to mortgage their property and receive periodic payments without the need to repay the loan until the end of their life while retaining property rights. The bank will provide the owner with regular income, and after their death, the property will pass to the bank. This way, the pensioner will be able to receive the value of their home gradually while continuing to live there.

The authors of the initiative argue that the property rights will be preserved throughout the entire duration of the contract. However, it's worth noting that serious issues may arise for the heirs of pensioners with the introduction of this new institute. In the event of a property sale, the bank is obliged to pay the remaining amount to the heirs, but only after settling all expenses.

Another innovation concerns the spouse's right to property ownership. It specifies that jointly acquired property during marriage will automatically be registered as the property of the surviving spouse in the event of one spouse's death. Moreover, it will eliminate the need to divide the property among the remaining heirs. Heirs will only receive inheritance rights after the death of the second parent.

After several discussions, this legislative initiative received a positive conclusion from the permanent committee of the National Assembly.