The current context of mobility, thanks to teleworking and the desire to have more outdoor spaces, has led to the change of residence of many families. In this context, living close to the children, the desire to reside in the town of birth, or the choice of a holiday destination to establish their habitual or seasonal residence after retirement are the main causes that move an older person to acquire a home and get into debt, according to Lola Alcover, secretary of the General Council of COAPI of Spain. “Even so, the demand for a mortgage by people over 65 years of age is not frequent since the funds to pay for the new home usually come from other channels, in most cases from the sale of the previous property, so they do not need bank financing ”, explains Alcover. On the other hand, financial institutions do not offer a specific mortgage figure that fits the profile of older ages and, in order to ensure debt collection, they tend to apply rigorous measures when processing loans of this type.
The age of the applicant is another point to take into account in the application for mortgages by senior profiles: “no bank will grant, in principle, a mortgage loan in which the sum of the applicant’s age plus the term The duration of the credit exceeds the range of 75, a figure that in some firms is reduced to 70 ”, points out Alcover, who adds that, for a 65-year-old person, the maximum term of a mortgage would be 10 years and 5 in the most cases restrictive.
Other types of financing
According to Alcover, there are other types of financing by older people, although the suitability of each product will depend on the needs of the buyer. One of these possibilities is the reverse mortgage, a loan guaranteed with a mortgage that falls on a home owned by the applicant free of charges, and whose amount will hardly exceed 50% of the appraisal. “When this percentage is reached, the major or dependent ceases to have the income and the debt continues to generate interest,” Alcover points out.
The sale of the bare property is another means of financing through which the owner of a home sells the ownership of their home to a third party, setting a price and preserving the right of usufruct. This, according to Alcover, is not the most recommended route because, although for tax purposes the calculation of the value of each of the portions is established by law, such valuation has no effect when setting the price of the property in the free market: “Whoever acquires bare ownership of a home, even if they have the right to own it, will not have the right to own, enjoy, or receive profitability while the usufruct lasts, and this is something that will always condition downwards what the market is willing to offer ”.
Finally, Alcover points to other types of entities outside the banking sector that offer mortgages for seniors of up to 70 years and with a maximum duration of up to 85 years of the borrower, although at a higher interest rate. “In any case, all the options must be carefully studied and, if the necessary knowledge is not available, be advised by professionals who are experts in the field to reduce the risk”, concludes Alcover.
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