If you are a senior citizen, a reverse mortgage is one of the best options you have to live without limitations. If you face liquidity problems or simply want to have a good retirement, you should know about this financial product.
It is considered in Law 41/2007, which establishes the requirements and regulations for this type of mortgage. Its main difference with a traditional loan is that it is designed to benefit people over 65 years of age.
In fact, it is a product that allows groups that previously did not have access to the advantages of the mortgage market to do so. We are talking about:
- Retired persons.
- Those who have some type of disability or severe dependency.
In addition, the reverse mortgage is a way of supplementing the public pensions of these social sectors. It is also important to improve the quality of life of adults. This is because it is a loan that allows to increase the liquidity of those who have low pensions, but during their working life were able to acquire a house.
Getting to know the reverse mortgage
A reverse mortgage is a type of credit granted by banks to senior citizens who own real estate. In exchange for the loan, the property is pledged as collateral and the collateral is collected or exercised upon the person’s death.
Contrary to how a traditional home purchase mortgage is handled, in this case the debt does not have to be paid in monthly installments. In fact, it does not have to be liquidated, but at the time of death, the institution will keep the property; unless, of course, a family member wants to pay the loan.
As part of the mortgage, the owner of the property will receive a monthly rent for as long as he/she is expected to continue living in the property. The amount will depend on your age, life expectancy and the value of the asset.
In some cases, a lump sum is agreed upon at the time of signing the contract, or monthly payments are agreed upon. Another alternative is to receive an initial amount and then periodic ministrations.
What do I need to order?
In order to apply for a reverse mortgage it is necessary to meet a series of requirements. The main requirement is to be 65 years of age or older. You can also do so if you can prove that you have a disability equal to or greater than 33%, or severe dependency. It is also required that:
- The property subject to the mortgage is in your name.
- The property is the place where you habitually live.
- That the property has been appraised and insured against damage.
If you meet these requirements, you may continue to live in the home. This is because both the payment of the debt and the guarantee can only be demanded after your death.
Some contracts even state that the property can only be claimed upon the death of the last of the stipulated beneficiaries. In this way, you secure your family’s assets for a longer period of time.
The reverse mortgage loan is only cancelled upon the death of the contracting party. However, according to the legal instruments in force, the heirs or beneficiaries may assume the debt and settle it, if they wish to keep the property.
This is because in legal terms they continue to be the owners of the property and, as such, have rights and responsibilities. In this sense, they can opt for:
- Settle the amount of debt plus interest.
- Selling the property and covering the loan
- If none of the above occurs, the bank may keep the property.
The reverse mortgage is an alternative for not suffering any type of deprivation in old age; however, as with any financial product, it is necessary to know how to handle it or request the support of professionals. For any questions you may have, please contact the law firm of Carlos Baño León, we are available to advise you on the subject.