Reverse Mortgage

It is possible to rent the property, although the holder of the Mortgage must inform the Financial Entity so that it is aware of the existence of this Rental Contract and can verify that it has been carried out under the Urban Lease Law.

The total debt of the Reverse Mortgages will be made up of the costs of setting up the mortgage, the monthly rents received and the interest accrued during the Reverse Mortgage operation. The cancellation of this debt must be assumed by the heirs, if they so wish, within one year of the death of the holder. If the heirs decide not to accept the inheritance, they shall have no liability for the Reverse Mortgage remaining amount.

This is the amount that the Elderly Person can request to collect at the time of formalising the Reverse Mortgage, in addition to the monthly amounts that correspond to him/her. The maximum amount of this first provision will depend on the appraised value of the property, being approximately 10% – 15% of the value of the property.

In reverse mortgage operations, there are two different stages concerning taxation. In the first stage, while the monthly amounts charged to the mortgage on the property are received, these monthly payments are not taxed in the Personal Income Tax. Subsequently, if the Life Annuity Insurance comes into play, the monthly amounts are considered as income from movable capital and will be exempt from income tax at 92%. For all these reasons, the taxation of reverse mortgages is excellent.

This is the insurance that in some cases must be formalised simultaneously with the Reverse Mortgage to guarantee that the collection of the amounts or monthly rent is for life, that is to say, until the death of the owners of the property.

The single premium for taking out this insurance does not have to be paid by the Elderly Person, as the amount is included in the costs of setting up the Reverse Mortgage; these costs are financed with the credit, like the rest of the costs.

This is the market value established at any given time by the Valuation Company with which the Financial Institution operates. This value will be the reference for setting the total capital available in the Credit, which will depend on the maximum percentage established in each case by the different Entities. The Law requires an official valuation of the homes on which Reverse Mortgages are constituted to be carried out beforehand.