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What Is A Reverse Mortgage And How Does It Work?

Hipoteca inversa | CHG

When the time comes to buy a home, one of the things we should think about is the type of mortgage we’re going to choose for. There are several options (fixed, mixed, variable…) that we have talked about on more than one occasion, but have you ever heard of a reverse mortgage? We are going to tell you everything you need to know about this way of obtaining income when you retire taking advantage of your property.

What exactly is a reverse mortgage?

Reverse mortgage is a type of mortgage loan for people over 65 or dependent people who own a property. Unlike a conventional mortgage, the holder is the one who receives from the bank an amount in exchange for the flat (usually as a monthly salary). In other words, the owner gives the property to the bank and can continue to use it until his or her death by receiving an amount each month. This is undoubtedly a good option for those who want to supplement their pension.

What are the requirements for the reverse mortgage?

As we mentioned, this type of loan is suitable for people over 65 who own a home. Although, as an exception, it can also be obtained by people with dependence. What if we are two people who own it? In the case of a married couple, for example, in which both are owners, both can apply for this mortgage. However, if you have any other mortgage, you should cancel it before contracting this modality.

Hipoteca inversa | CHG

How much do you get per month?

The rent received per month is different for each person. What does it depend on? Mainly on two factors: the value of the property and the age of the applicant (the older he/she is, the higher the monthly rent).

What kind of incomes are there? Lifetime, temporary or single disposition.

  • In the lifetime income the subscriber receives an amount per month for life that in any case is less than the temporary income (to ensure that the value of the mortgage does not exceed that of the property).
  • In the temporary period income is fixed during a negotiated period in which the total sale value of the property is received. Once the full amount has been received, the person can continue using their home but will not charge more.
  • The single disposition reverse mortgage will receive a single amount for the value of the dwelling.

Our recommendation? It is best to choose one or another alternative depending on your age (it is better to choose the temporary one if you are older, as it usually has a higher amount than lifetime).

What if you regret it once the agreement is signed? Can you cancel it?

Yes, you can cancel it at any time. However, at the time of cancellation you have to return the amount received to date.

Hipoteca inversa | CHG

What do you think of the idea of having reverse mortgage? If you’re of retirement age, it’s certainly a good option to consider. If not, here you will find more options to acquire one of our CHG homes with greater ease and peace of mind.

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