61% of Spaniards have heard of the reverse mortgage, but only 13% say they are fully informed about how it works. This data, revealed by the Savings and Investment Observatory in Spain from Caser Seguros, highlights a key problem: ignorance is the main barrier to contracting this financial product. According to Nuria Lopezdirector of cross-service and reverse mortgage services at Caser, this limits many older homeowners‘ access to an important source of income in retirement.
This product, aimed mainly at people over 65 years of age who own a home, allows you to obtain liquidity without having to sell or leave your home. It works the opposite of a traditional mortgage: instead of paying the bank, it is the bank that pays the owner. “The reverse mortgage is the only regulated product that allows seniors to obtain income from their home without losing ownership or the right to continue living in it,” explains López.
Lack of knowledge and cultural concerns slow down demand
Caser’s study reveals that only 15% of those who know about the reverse mortgage knows about its tax benefits, such as personal income tax exemption and the deduction of debt in estate tax. The most surprising thing is that it is those under 45 years of age, and not retirees, who best understand these advantages. Meanwhile, 67% of those over 65 years of age, precisely the target group of this product, admit that they are unaware of its tax operation.
The reverse mortgage also confronts the cultural roots of the property. In Spain, 90% of those over 65 years of age own their home, according to the Bank of Spain, and the idea of leaving debts to children generates rejection. Thus, a 33% of respondents I would not contract this product so as not to mortgage the following generations, a 32% view it with distrust and a 27% feel they do not have enough information to make a decision.
Despite this, 52% of those surveyed would consider taking out a reverse mortgage. Of them, the 29% would do it to supplement their pension and secure additional income in retirement, while a 35% of those over 65 years of age I would value it to cover medical expenses, pay for a residence or adapt your home to the needs of old age.
Practical examples of what can be obtained
The product offers two modalities: monthly payments or one initial single provision. In the case of monthly payments, for example, a 75-year-old owner with a home valued at 500,000 euros would receive 543 euros per month until the age of 102. At age 85, the monthly payment would increase to 1.026 eurosand at 93 years old, 1.683 euros up to 107 years old. Under the single drawdown option, that same owner could receive a down payment of 85.000 euros at 75 years old, 160,000 euros at 85 o 195,000 euros at 93.
López emphasizes that the product is designed so that the debt never exceeds 70% of the value of the home at the time of contracting it, even considering the accumulation of interest. “Our calculation takes into account the life expectancy of the holder plus a margin of five years. This allows the home to maintain a value higher than the debt, making the property remain attractive to heirs,” he details.
In the event of death, the heirs have three options: sell the home to pay off the debt and keep the surplus, pay the debt to keep the house, or give up inheritance. This approach ensures that the decision is left in the hands of family members, preserving family property if they wish.
A little developed market in Spain
Currently, few entities offer reverse mortgages in Spain: Caser, Santander, Mapfre, Catalana Oeste, Caja de Ingenieros and Óptima Mayores. This limits access to a product that experts say could help many retirees cope with economic uncertainty.
Caser highlights that the majority of its clients look for this product to supplement their income or face unforeseen expenses. However, much remains to be done so that knowledge about reverse mortgages grows and the taboo around using housing as a source of financial resources in retirement is broken.
