The reverse mortgage is a type of mortgage that is somewhat particular, aimed at people over 65 or dependents who own a home, and you may be interested to learn what it can do for you and your finances?
Unlike the conventional mortgage, in this case, it is the holder who receives from the bank an amount in exchange for the apartment (usually in the form of the monthly rent). The advantage is that you can continue to use it until your death and at no time lose ownership of your home.
The amount of the income to be received will depend on several factors, such as the value of the house, the age of the person who hires the loan and of his spouse and the choice made between receiving the rent for a specific period or for life. It is common for marketers to offer the simultaneous contracting of a life annuity insurance, in order to guarantee that the elderly can receive that complementary income until their death if they so wish.
The entity granting the reverse mortgage cannot demand the return of the accumulated debt until the owner or the last beneficiary of this credit system dies, as established in the contract.
What happens to the heirs? Upon the death of the owner, the heirs are responsible for both the ownership of the home and the debt accumulated with the financial institution, and have two options:
Stay with the home: for this they must settle the debt with the entity, returning the borrowed money. If they do not have the assets to do so, they can be financed through the creation of a normal mortgage on the home, for the amount of the debt.
Sell it: in this case, the amount of the sale is used to settle the debt contracted by the owners of the reverse mortgage. If the amount is not sufficient to satisfy the accumulated debt, the entity may urge the sale of other assets of the estate.
In short, the reverse mortgage is an alternative to supplement the pension. As it is a loan, these additional monthly income are not taxed.
The income received will depend mainly on two factors, which will be the value of the home and the age of the applicant of the financial product. As the subscriber’s age advances, the monthly rent that will be received for the operation will increase.
The amount received will also depend on whether you subscribe a life, temporary or one-time reverse mortgage. The higher the subscriber, the more advisable the temporary rent is because it usually has a higher amount than the life annuity and it can be more lucrative for the one who hires the service.
These financial operations entail a series of expenses that will be: agency, liquidation of taxes, notary and registry. Our entity will advance these expenses on account of the loan and the only expense that we would have to face directly would be the appraisal of the home.
Michael started out with a degree in Finance Master, before devoting his time to tech and coding. He now works as a freelance journalist and video producer living in Berlin, Germany. When he’s not writing , he travels many countries.