A home you own is a valuable asset for the future. According to the census of the National Institute of Statistics (INE), three out of four households in Spain, 75.5%, owned their home in 2021. Although the percentage has fallen 3.4 points in a decade, real estate assets residential is the basis of wealth for many families. Until recently, achieving liquidity without having to sell the home was difficult. “Convert housing into an economic resource for the senior population [más de 65 años] it is possible thanks to the reverse mortgage”, points out Ricardo Gulias, executive director of RN Tu Solución Hipotecaria. This formula is emerging as the most appropriate solution to not lose ownership of the property and receive extra income. Gulias highlights that this financial product “allows you to face retirement with the greatest possible financial well-being, freely disposing of the house until a certain age or until death and receiving a monthly income or a single payment at the same time.” Reverse mortgages have shown extraordinary momentum in recent years. According to the General Council of Notaries, in 2022 787 operations were reached, a figure that far exceeded the signatures of 2021, when 197 were registered. The year-on-year increase has risen to 299%. The increase between 2022 and 2021, of 77%, was also notable. The most recent data from notaries collects 177 reverse mortgages in the first quarter of 2023.
Gulias explains that “the aging of the population and the uncertainty surrounding public pensions favor the expansion of the reverse mortgage.” However, the expert identifies some obstacles: “There is still the drag of having to inherit a home to the children in many families.” Added to this cultural factor are the doubts raised by its operation. “It is essential that both the client and his heirs understand what this method consists of and what this method implies to monetize the property, since many believe that ownership is lost and cannot be recovered.” Unlike the more traditional outlets, such as sale and rental, the reverse mortgage does not entail the abandonment of the property, while the bare ownership “allows you to continue inhabiting the house thanks to the fact that the usufruct is maintained, after the death of the heirs they do not have the option of assuming the debt and re-disposing of the property, which is the system that defends the reverse mortgage”.
The spokesperson for RN Tu Solución Hipotecaria points out that each case must be studied in detail: “In addition to the situation of the home and its characteristics, which are aspects directly related to its value, other key factors come into play such as the age of the client, their marital status and life expectancy. Receiving expert advice to find out the profitability that would be obtained through this operation is highly recommended, in order to compare and make an informed decision”.
The evolution of the reverse mortgage is very promising. “We are seeing more and more entities that are committed to including this product in their offer,” says Gulias. From this perspective, the progressive commercial interest in this mechanism is “good news” for the client: “Greater promotion of the reverse mortgage intensifies competition and results in a broader, more attractive and personalized catalogue”. With great demand in the United States and the United Kingdom since the 1960s, the Spanish mortgage market is recovering this mechanism after stagnating in 2018. Three types of income are established: temporary, lifetime or single disposition. The amount received will be the partial value or the maximum with which the home has been appraised. And, in addition, this income is not taxed in personal income tax. Once the holder dies, the heirs are presented with the option of repaying the mortgage loan with their own funds, selling the home and paying off the debt, or signing a new mortgage loan to pay off the money borrowed.
Equivalent Annual Rate (TAE) and Nominal Interest Rate (TIN)
Acquiring a home is a dream for many people, a situation in which the vast majority of mortals end up applying for a mortgage. That is, you end up in debt for a long period of time and for a large amount. Specifically, the average mortgage in Spain stood at 145,347 euros in the first quarter of 2023. Payment of the installment represents an average monthly disbursement of 648 euros, in an environment of rising interest rates and tightening of concession conditions . When the time comes, confusion arises between the Equivalent Annual Rate (TAE) and the Nominal Interest Rate (TIN).
2023-08-30 23:28:39
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