Reverse mortgages: when your house pays you

Reverse mortgages: when your house pays you

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In Spain there are approximately six million people receiving a retirement pension. Of this figure, almost half earn less than 900 euros per month, so these people face significant difficulties in meeting all their expenses.

However, 90% of this group of over-65s own their home. For all of them, the reverse mortgage option can be an interesting alternative to give them greater peace of mind.

For seniors and people with disabilities

Not everyone can opt for this formula: the mortgage holder must be 65 or older. People who can accredit a level of disability that is equal to or greater than 33 percent, or severe or major dependency, can also take advantage of reverse mortgages.

How it works

The reverse mortgage is, as its name suggests, the opposite of a traditional mortgage. In a standard mortgage taken out to buy a property, the beneficiary of the loan pays an instalment each month which gradually reduces the amount of money they owe to the financial institution. In the case of a reverse mortgage, it is the financial institution that pays the beneficiary until their death, at which point the heirs can decide to either hand over the property to the institution or buy it back.

Main concerns

Does the reverse mortgage change the ownership of the house? Does it become the property of the financial institution when the contract is signed? This is one of the main concerns that may arise with this product, but the answer is a resounding NO. For the entire duration of the reverse mortgage, the property remains in the name of its owner and there are no changes of ownership in favor of third parties. Owners do not lose their real estate since it is their guarantee to receive the loan to complement their pension.

Can it be canceled?

In the conditions of the reverse mortgage, details can be agreed such as whether the money is received in a single payment or as regular income, with the frequency chosen by the mortgage holder – monthly, quarterly, etc., or for life, which is the most recommended option. And, of course, there is always the possibility of reversal. Like regular property mortgages, reverse mortgages also have cancellation rights that the beneficiary can exercise at any time.

Transparency

It is very important that the entities offering this option are transparent and provide the people who are interested in it with clear, accessible, comprehensive and simple information. This is a very interesting option, but it is not without a certain complexity and, most importantly, it is specifically aimed at vulnerable groups.

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