Reverse Mortgage

Of course, you can. The Reverse Mortgage is always signed for the entire property, so all the owners will have to formalise the credit, although the children do not act in any case as guarantors of the operation but simply authorise the contracting of the Reverse Mortgage on the part of the property that they own.

The Reverse Mortgage Law allows access to the reverse mortgage for people under 65 years of age only if they are recognised by the Administration as dependent in any of its degrees, or when they have a disability equal to or greater than 33%.

Yes, it is possible to take out a reverse mortgage. You have to cancel the current mortgage through an initial provision on the credit granted in the Reverse Mortgage. However, it must be taken into account that the majority of entities establish a maximum limit for initial drawdown so that only small mortgages that do not exceed 15% of the appraised value of the home can be cancelled unless the elderly person can cancel the old mortgage directly if they have the savings to do so.

From the moment the Senior Citizen asks us to take out a Reverse Mortgage, all the formalities involved in taking out the mortgage until it is signed at the Notary’s office can take approximately one or one and a half months.

Currently, to take out a Reverse Mortgage, banks require that it be the main residence of the Senior Citizen, which is the one on which the tax exemptions and the reduction in Notary and Registry fees have been established. However, as the Law allows the product to be extended to other types of property, you will have to pay attention to possible changes in the marketing of the Reverse Mortgage that may occur at any given time.

Following current regulations, Reverse Mortgages can only be granted by credit institutions that operate in Spain and are regulated by the Bank of Spain.

The amounts received through the Reverse Mortgage do not have to be declared in the Income Tax as they are drawdowns of credit, so you will not have to pay anything for it. If the holder of the credit survives the maturity of the same, the Life Annuity Insurance will come into play, and from that moment onwards the monthly payments received will be exempt from Income Tax on 92% of the payments, so the resulting effective rate, once the corresponding 19% withholding tax has been applied, would be 1.52%.

No, it won’t. The monthly payment you receive through the Reverse Mortgage will remain constant until the end of the operation. This is because, otherwise, the Bank would never be able to determine the maximum amount of debt granted, which would be detrimental to the heirs’ ability to pay off the debt.

Not at all. You continue to be the owner of the property because what you are contracting is only credit, the payment of which is guaranteed by the property. That is why, on the death of the owner of a property on which there is a Reverse Mortgage, the new owners will be the legal heirs of the deceased.

No, not at all. It is an indispensable condition in the Reverse Mortgage, as established in Law 41/2007, that the debt cannot be claimed until the death of the last of the contracting parties. Logically, the Elderly Person must respect all the clauses established (presentation of proof of life when required, maintaining home insurance in force, payment of the Property Tax, etc.). On the other hand, the Elderly Person can cancel the accumulated debt at any time, if he/she wishes to do so.

The market value of the home will always be determined by an Independent Valuation Company registered in the Official Registry of the Bank of Spain, thus guaranteeing the utmost rigour in the completion of this compulsory procedure of the Reverse Mortgage.

It is very difficult and highly improbable that this situation occurs since the Financial Institutions design these products setting sufficient margins so that the heirs can easily pay off the debt on the death of the mortgage holder. However, if this were to occur due to an extreme depreciation of the property, it should be remembered that the entity will have the total amount of the inheritance as the limit of the claim, whether this amount is sufficient to cancel the debt or not.

Many banks offer Reverse Mortgages, so depending on different factors (age, value and location of the property, etc.) for each Elderly Person, the most suitable Bank to take out a Reverse Mortgage on their property may vary. At Grupo Retiro, as independent advisors specialised in this product, we offer you our services without any obligation to help you in this task: not only in the process of contracting but also during the whole term of the Reverse Mortgage until the moment of its cancellation by your heirs.

The Reverse Mortgage involves taking out a mortgage loan on which the well-being of the Elderly Person will depend. Given this importance, Law 41/2007 which regulates this product has provided for the obligatory existence of independent advisory services to guarantee that the elderly person and their family are aware of the different offers available on the market and the exact conditions of each one, accompanying them throughout the process of preparing the documentation, taking out the Reverse Mortgage with legal assistance during the signing, etc.

According to Law 2/2009, of 31 March, which regulates the contracting with consumers of mortgage loans or credits and intermediation services for the contracting of loan or credit contracts, these services can only be provided as “independent” by companies that are not directly linked to any financial institution and that comply with the legal obligations of being registered in the State Register of Companies (Grupo Retiro is registered under number 309 – second section) and have a civil liability insurance policy in force (Grupo Retiro’s policy with AXA Seguros Generales, number 82711897).

Reverse mortgages are widely used abroad, mainly in Anglo-Saxon countries, and specifically in the United Kingdom, where they have been marketed since the 1960s. Reverse mortgages can also be taken out in European countries and are slowly beginning to be introduced in South America. Spain stands out for having a special characteristic that makes the development of reverse mortgages in our country favourable, and that is the high level of homeownership among the elderly.

The Reverse Mortgage and the Life Estate Annuity are two of the products that exist so that the Elderly can make their home profitable during their lifetime. Opting for one or the other will depend on the needs that the Elderly Person has to cover, their age, family situation, etc. Our experience since 1996 as a pioneer and leading company in Spain in the management of these products allows us to help you at all times to determine which of them is most advantageous for you.