Let us remember that a mortgage is a banking product through which a user can acquire the necessary financing to be able to acquire a real estate with the obligation to return all the money that has been loaned to him. One of the types of mortgages that exists is known as a reverse mortgage , a different type of mortgage loan , which is mainly aimed at people over 65 years of age .
The reverse mortgage is a mortgage loan through which the bank gives the client a single credit and he must put his home as collateral , instead of receiving money to buy a home, the client is given the corresponding amount of money to the value of the home .
- Reverse Mortgage Features
- What is it for
- How the reverse mortgage works
- Can the house be recovered?
- Importance of the reverse mortgage
Reverse Mortgage Features
Among the main characteristics of the reverse mortgage , the most important of them are mentioned:
- It is a type of mortgage loan .
- The property must not change its name and possession of the real estate must not be lost .
- It is closely linked to the real value of the home.
- It can be charged monthly , quarterly or it can also be a one-time charge .
- Only people who are over 65 years of age can apply for it .
- It is used mainly by people who are retiring from their jobs.
- When the debtor dies, the designated heirs have the option of returning the money and repossessing the home.
- With the reverse mortgage you do not have to pay taxes of any kind.
- It is also known by the name of reversible mortgage or mortgage pension .
What is it for
The reverse mortgage serves so that older adults have the option of being able to live better during their last years, without having to pay anything for the money generated by the bank. Is a mortgage that helps the user to receive an income monthly , quarterly or a single payment , which shall not be returned in life, but the debt is postponed until the client dies.
For a person to be able to opt for this type of mortgage, they must meet some special requirements:
- Must be over 65 years of age.
- It can also be requested by people who are in a condition of severe dependency .
- You must have a home of your own .
- The applicant’s home must be free of financial charges .
- If there is any type of mortgage loan before applying, they must be canceled .
How the reverse mortgage works
The reverse mortgage works mainly depending on the value of the property . The user must make the request and later, may receive from the bank a sum of money that can be deposited monthly , quarterly or can also be deposited in a single payment . It works like a reverse loan where, instead of the client having to pay the bank, the entity is in charge of depositing a sum of money for life.
When the applicant dies , the heirs will have the ability to choose if they want to return the money loaned to the bank in order to keep the house in their possession, they can choose to sell the property and pay the debt or they can also opt for a new mortgage with the objective to pay little by little the amount generated.
The necessary conditions to be able to opt for a reverse mortgage are the following:
- The applicant must be over 65 years of age and also a dependent.
- The income that is contributed to retirement must have a disability greater than 33%.
- You must be the owner or owner of real estate, in this case a home.
- There must be heirs .
Some of its most important advantages are:
- the homeowner will be able to keep the property , in other words, he will be able to continue living in it without any problem, also maintaining the title of owner.
- No amount of money must be paid to the bank.
- The mortgage can also be canceled at any time you want, for example, if you decide to make a sale.
- The amounts received by the elderly are not subject to taxation, therefore they have excellent taxation.
- If necessary, the house can be rented without problems.
- The consent of the heirs is not required to request it.
- In addition to being reversible , most banks do not charge extra money for the early cancellation of the mortgage.
- The applicant does not need to provide any kind of justification or explain how the requested money will be used.
In the reverse mortgage there are also several disadvantages that must be taken into account when performing this operation. Among them we can find the following:
- The expenses of the constitution of the mortgage must be assumed by the debtor .
- You must have home insurance .
- The costs of appraisal of the property must be paid by the applicant.
- The heirs will have the responsibility of facing the amount that has been requested if they wish to recover the home after the applicant dies.
- It is necessary to have a home as an owner to have access to this type of mortgage.
- They can only be requested by older adults .
Can the house be recovered?
After the owner of the reverse mortgage, the heirs can recover the home , but to achieve this, they must pay the amount established between the total balance of the loan and 95% of the total appraised value of the real estate. Generally, you have a period of 30 days after the notification is received to be able to pay, buy the house or deliver it to pay off the debt. On many occasions, this period can last up to a year.
Importance of the reverse mortgage
The reverse mortgage turns out to be one of the most effective means that exist within the banking system so that the elderly can cope with their old age in a dignified way , without having to go through financial needs that affect their quality of life. It is also a good way to supplement the pension and face money problems without losing your home.
A couple formed by the wife who is 70 years old and the husband who is 76 years old. They live in a house that is valued at 200 million, which they managed to acquire years ago thanks to their work as teachers. The wife decides to go to the bank to apply for the life annuity modality, which is acquired through the reverse mortgage. The bank advisor is in charge of explaining all the aspects related to this type of mortgage, she accepts the deal and after it is approved, the married couple begins to receive a monthly income of $ 400,000 without having to leave their home or have to pay monthly fees to the bank.