In Spain, around 80% of the inhabitants have their own homes. That is why the banks have a beautiful product for this country of owners. The world of mortgages is vast. These banking products have different characteristics, and there is a mortgage loan for each type of public. For example, the reverse mortgage is intended for people over 65 or dependent homeowners.
The reverse mortgage, what is it?
Reverse mortgages are somewhat peculiar in that they are intended to help seniors positively face their expenses throughout retirement. These people must own property of a particular value and locate in a specific location.
As its name indicates, we would be acting in reverse in these mortgages. In other words, unlike traditional mortgages, the bank allocates a specific amount of money (usually a monthly income) to the holder. Of course, this owner will have to give his property to the bank in exchange for this “favor,” When he dies, this property will become his bank of him. In addition, an excellent advantage for the recipient of the reverse mortgage is that the complementary amount that he receives is not taxed in personal income tax.
What would the reverse mortgage fee be?
This type of mortgage payment is not a fixed income. The amount depends on some characteristics subject to the holder. These factors are usually related to the home’s value, the age of the applicant and his spouse, and the option of receiving the income (definitely or for life). Sometimes, marketers advise the holder to take out life annuity insurance at par. In this way, the applicant can be guaranteed to have this reverse mortgage installation until his death.
The debt generated by the reverse mortgage
The debt will accumulate over time until the holder’s death or the death of the last beneficiary of this loan (participants of this mortgage credit system must reflect in the reverse mortgage contract). Until then, the bank will not be able, in any way, to claim the restitution of the generated debt. And, what’s more, the bank will not be able to take the real estate property from the applicant.
But what happens to the heirs when there is a reverse mortgage?
We could say that this is where the drawbacks come (in a way). When the owner of this credit operation dies, the heirs do not receive only the property. But they will also have to carry the total debt linked to the owner of this home. In this situation, the heirs have two simple options: assume the obligation and become owners of that property or forget about the debt by selling the house.
If the heirs decide to keep the house, they must settle the debts with said bank. To resolve this debt, they must repay the entire amount of the debt. If they do not have the amount of the charge at that time, they can contract a current mortgage for this amount.
If these heirs decide to sell the flat, the profit acquired by the sale process will be used to pay off the owner’s debt of the reverse mortgage. But what if the transaction amount does not cover the entire debt? In this case, the banking entity will take action on the matter, speeding up the sale of another real estate of the inheritance.
After all, the reverse mortgage is an excellent way to obtain extra income without depending entirely on a pension. So if you are interested in acquiring a reverse mortgage to get that additional income or want a 100% mortgage, contact our mortgage experts. They will inform you about this entire process without any commitment.
