In this way, in general, the average consumer suffers a loss of purchasing power and is unable to find financing beyond their salary. This problem is aggravated when we talk about pensioners or dependent people who see their income decrease even more and their economic capacity especially suffers from this generalized inflation. According to data from the OCU, At least 30% of retired Spaniards currently need a supplement of money for their retirement.

In a situation like this, safe and stable financing alternatives are beginning to be considered. Here we will address the figure of the reverse mortgage as a simple legal transaction for the mortgagee and with a guarantee of regular income. With its advantages and not without drawbacks.

The first question that must be clarified is: What is a reverse mortgage and who can apply for one? According to the Bank of Spain, the reverse mortgage is a credit or loan that is guaranteed with a mortgage that encumbers a habitual residence (or others), which is granted once or through periodic benefits, to a person over 65 years of age or with a serious or very serious degree of dependence. For a layman to understand: It is a loan for retirees or serious dependents in which the bank will give you money for your house during your life while you can continue using it until you die. Furthermore, it will be considered an additional requirement that the pension allows the mortgaged home to be maintained; something understandable when this property will be what guarantees the loan.

It seems logical to understand that it is necessary own a home as owner preferably free of charge. If you still have a current mortgage on the property you want to mortgage, the reverse mortgage loan can be extended to pay off the first one. As a legal recommendation, from a tax point of view, It is interesting that the mortgaged home is the usual one so that it is not necessary to settle and pay the Tax on Documented Legal Acts.

In general, The income obtained with this mortgage depends on the value of the mortgaged home and the age of the borrower.. Logically, if this mortgage is signed at 80 years of age, a greater amount can be received than if it is formalized at 65 years of age. The duration of the loan will be shorter the closer the borrower’s end of life is. These periodic income are usually established on a monthly, quarterly or even semi-annual basis. What would happen if we lived longer than expected and the money ran out? In these cases, the credit institutions have signed a contract with the insurers. contract model for deferred annuities. Although according to data from the OCU, these insurances are very expensive and credit institutions usually require a single payment at the beginning of signing this type of mortgage.

An aspect that usually worries consumers considering this type of product is What type of taxation does it have and how much must be taxed on this income. It could be said that it is one of their advantages if you know how to configure it: they are not subject to paying Personal Income Tax (IRPF), as long as it is not configured as a periodic income that would then be considered a return of real estate capital. The technical reason is because they are provisions of a credit granted by a banking entity (or fund) and not an income as such. That is, it will not be necessary to pay taxes on this income; This is how it is contemplated in the additional provision 15 of the Personal Income Tax Law. An exception is what is received if the annuity insurance is activated if the expected period is exceeded (if the borrower lives longer than expected…). In that case, 1.44% of the income would be taxed thanks to its inherent tax advantages.

Another important question that may arise for the consumer would be What happens when the borrower finally dies. In that case, his heirs must decide whether to return the money that the deceased has received while alive and recover the home by canceling the mortgage or they could even take out an ordinary mortgage and gradually pay off the debt generated by the deceased to maintain the property. property. According to OCU statistics, entities usually grant in practice a period of one year to pay this debt which is usually much lower than the real value of the home.

And good, What advantages can be extracted from this type of mortgage? Perhaps the main one is what in economics is known as “monetization” of your home. All of this without the obligation to rent it to a third party or even sell it, thus permanently losing ownership. For a retiree or seriously dependent, it is a way to get extra income that will help them complete their meager pension, all while maintaining their usual home. Furthermore, as explained above, when the time comes, the heirs could cancel that mortgage and avoid the loss of the home by paying what is owed. Even these beneficiaries of the deceased could collect the remainder of the loan and let the entity finally keep the guarantor property.

But, not everything has to be praise, too There are disadvantages as in any legal business.. One of them could be the loss of value due to inflation. In this way, the capital will depreciate and may reach a situation in which the property that serves as collateral has less value than the loan itself. In that case, it will be the heirs who will assume it if they accept the inheritance with the charges included.

On the other hand, this mortgage also will generate interest and formalization expenses that the consumer must take into account when formalizing it. Furthermore, as already mentioned in previous lines, the situation may arise where a life annuity insurance because our life expectancy is higher than expected and that makes the final price of the loan much more expensive. That is, if you live too long it becomes expensive.

In short, the reverse mortgage is a banking product of some complexity that helps consumers who are in their final life stage and people in situations of serious dependency. There are those who criticize this legal business because play with life expectancy and in a certain way “a price is put on your later years” and that, in addition, sometimes the lending entity hides other associated products in it. But as has been explained, it is nothing more than another form of freely available financing for those who want it and, in addition, meet the requirements established by the regulations on the matter and that with good legal advice can be contracted with transparency.

2023-12-12 10:38:00
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