INTRODUCTION.

The reverse mortgage is conceived as a financial resource, so that people of a certain age or level of dependence, may make the value of their property liquid, without having to part with it.

Thus, with this type of mortgage, the receiver of the payment (periodical or lump sum) is the client who contracts the reverse mortgage, while the entity who concedes it, only receives the payment of the loan upon the death of the client or other beneficiary.

THE REVERSE MORTGAGE AS A MEANS OF OBTAINING CASH FLOW.

CONCEPT

The reverse mortgage, regulated in Law 41/2007 of 7th December, is defined as a loan or mortgage credit, through which the bank or savings bank pays an amount (periodically or in a lump sum) to a person, in exchange for the latter using the property as a guarantee.

In this way, this law intends to meet the need for increased income during the later years in life, by offering an important economic power.

CONDITIONS:

  • The applicant and the beneficiaries appointed by the latter must be 65 years old or older or suffer some level of dependency.
  • The client must receive the amount of the loan in a periodical or a lump sum payment.
  • The debt is only demandable by the entity granting the loan, upon the death of the borrower, or where applicable, the last of the beneficiaries.
  • The mortgaged property must be valued and insured against damages.

ADVANTAGES:

  • The owner conserves the title to the property.
  • The operation may be terminated at any time.
  • The income received by the owner is not taxable (which makes this operation preferable to a donation in certain cases).
  • The real revaluation of the property remains with the owner.
  • The debt is not demandable until the death of the owner.

FINANCIAL CONTENT.

A reverse mortgage is intended to facilitate the securing of financial resources for certain persons, who receive the cash payments but are not obligated to return them, since the credit entity shall not receive the lent capital nor the interest payments until the death of the beneficiary. In this way the repayment of the cash received is the responsibility of the heirs or, alternatively, via the conversion of the property into cash.

CONCLUSION

Despite being a financial instrument requiring the advice of an expert before consideration, it is a great opportunity for all those who wish to enjoy the savings accumulated in their property in life, in this way converting their wealth into cash, without parting from their property.

 

 

Vilá Abogados

 

For more information, please contact:

va@vila.es

 

3rd of May 2013