Seguros y pensiones para todos

Reverse mortgages: when your house pays you

Reverse mortgages: when your house pays you

Home > Blog > Reverse mortgages: when your house pays you

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.

You may also like…

Life insurance and the theory of decreasing responsibility

Life insurance and the theory of decreasing responsibility

In other words, these policies allow you to plan your finances and get the level of protection you need at any given moment. For this very reason, the question of when it is advisable to take out a life insurance policy goes hand in hand with specific phases of life,...

5 tools for saving money on your inheritance

5 tools for saving money on your inheritance

The big difference is that you know when you have to pay your taxes, but you don't know how much time you have to plan your inheritance. The solution? Do it as soon as possible so that nothing is left to chance. This is how you can really save your loved ones time and...

New ways of taking out insurance, same efficiency

New ways of taking out insurance, same efficiency

Digital channels play an especially important role in the early stages of the purchase decision. Currently, approximately 75% of consumers search online for information about car and health insurance and almost 60% look for home, life and savings insurance, according...

Alexa and OK Google help you with home insurance

Alexa and OK Google help you with home insurance

Adjusting lights, changing the temperature and activating alarms can be done without having to lift a finger: virtual assistants like Alexa and Google respond to our voice and can be used to control these functionalities, making them more direct, immediate and simple....

Passive or active investment, which is for you?

Passive or active investment, which is for you?

And what if that were not the only way to invest? Within the different strategies there are two basic options: active investing and passive investing. You are most likely to be familiar with the former and less familiar with the latter. Passive investing allows you to...