2026-10-28
The National Assembly of Armenia has adopted legislation regulating reverse mortgages. It will take effect on January 1, 2027. Under the law, a property owner who has reached the statutory pension age may use their property as collateral for a loan from a bank or credit organization and receive money under the terms of a contract, while retaining ownership and use of the property.
With a conventional mortgage, the borrower makes regular payments to the lender. With a reverse mortgage, the bank or credit organization provides money to the property owner, using the property as collateral for the loan.
Using a property as collateral does not, by itself, transfer ownership to the lender. The owner retains the property and continues to live there. Eligible collateral may include an apartment, residential house, garden house or summer house. At the time the contract is signed, the property must be free of third-party rights. The owner must continue to live in the mortgaged property throughout the contract.
The law allows payments to be made periodically each month or as funds for a purpose specified in the contract. The amount and payment terms will be set by the lender’s offer and the contract.
A reverse mortgage is a loan obligation. Interest on the amount provided accumulates during the contract and is not paid through regular monthly repayments. The interest rate must be fixed and must not exceed the maximum set by law. The contract must specify how interest is calculated.
The law includes requirements intended to make the terms clear and protect the property:
The following is a hypothetical example, not an actual bank offer. Suppose a pension-age homeowner’s apartment is appraised at AMD 30 million, and the lender offers monthly payments of AMD 100,000. For this example, also assume a fixed annual interest rate of 8%, within the statutory cap, with interest calculated and added to the outstanding balance monthly.
Over five years, or 60 months, the homeowner would receive:
AMD 100,000 × 60 months = AMD 6,000,000.
Because interest accrues on each payment from the date it is received, the balance at the end of five years would be approximately AMD 7,348,000 under this hypothetical calculation. Of that amount, AMD 6 million is the money paid to the homeowner, and approximately AMD 1.35 million is accumulated interest. Appraisal, insurance and other potential costs are not included.
The calculation uses the following formula:
100,000 × ((1 + 0.08 / 12)^60 − 1) / (0.08 / 12) ≈ AMD 7,348,000
This example assumes that payments are made at the end of each month and that interest accumulates monthly. The law does not set an 8% rate or prescribe this calculation method; both assumptions are used only to illustrate how the mechanism could work. The actual rate and calculation method will be set in the contract in accordance with the law.
If the contract ends because the homeowner dies at the end of the fifth year, the heirs may repay the debt within six months and keep the apartment. Under the example’s assumptions, the amount to be repaid would be about AMD 7.35 million, excluding contractual costs. If the apartment is sold for the same AMD 30 million, approximately AMD 22.65 million would remain for the heirs after repayment, before sale and other costs. If the sale proceeds are not enough to cover the debt, the shortfall cannot be collected from the heirs’ other property.
The law provides for an indefinite contract. This means there is no fixed end date, such as ten or twenty years. The contract ends in circumstances specified by law, including the owner’s death, sale or other transfer of the property, establishing permanent residence elsewhere, or full repayment of the debt. Permanent residence elsewhere must be established by a court.
After the owner’s death, the heirs have six months to repay the debt and acquire the property. If the debt is not repaid during that period, the property may be sold to cover it. Any proceeds remaining after repayment are returned to the heirs. If the sale proceeds are less than the debt, the shortfall cannot be collected from their other property.
A reverse mortgage may allow a pensioner who owns property to convert part of its value into funds for current use without selling it immediately. At the same time, accumulated interest and contractual costs may reduce the amount needed to retain the property or pass it on to heirs.
Before signing, it is important to compare the payment amount, interest rate and calculation method, appraisal and insurance costs, early repayment terms, and the options available to heirs. The law takes effect on January 1, 2027. Practical terms should be confirmed with banks and credit organizations that offer this type of loan.
Similar mechanisms are used in other countries. For example, the U.S. Department of Housing and Urban Development’s Home Equity Conversion Mortgage (HECM) program allows eligible homeowners to receive part of their home’s value as funds while retaining ownership. The U.S. program has its own terms and eligibility criteria and is not identical to Armenia’s framework.
This article is based on official sources available as of October 28, 2026. The main Armenian source is Law HO-321-N, which establishes the reverse-mortgage provisions in the Civil Code. The legal provisions have been presented in simplified language while preserving their meaning.
The article includes one illustrative calculation to explain the mechanism. It assumes monthly payments of AMD 100,000, a hypothetical fixed annual interest rate of 8%, monthly interest accumulation and a 60-month period. The law does not set these figures or require this calculation method. Actual payments and the debt balance will depend on the lender’s offer and the contract. No other numerical forecasts or market estimates have been made.
Official sources
Authors and Tool
Developed and supplemented by: RED Invest Group
Authors: Serzh Nazaryan, Vardan Eloyan
Tool used: ChatGPT for article structure and editing. ChatGPT is not a data source.
