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The BdE advises betting on the reverse mortgage, but forgets that it has drawbacks

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The reverse mortgages waves bare property sales they are mechanisms to which users can turn to their real estate wealth and secure better income for retirement. In fact, the Bank of Spain encourages the development of these products, which, however, also have some drawbacks that should be known before deciding to hire them.

There's a "suitable" context to develop "responsible and competitive" financial products so that older people can use their real estate wealth to access liquid financial assets in "attractive and safe" conditions. It is the idea that recently transferred a report from the Bank of Spain. Of course, he required that these instruments they cannot be "substitutes" for pensions.

Even so, there seems to be some encouragement for entities to begin to market the reverse mortgage as a product more focused on the retirement stage, since in our country offer missing of this type. The contracting of this product allows obtaining a supplement to the pension, which is why the body makes this appeal at a time when it considers that the pension system is Spain can not remain viable if no adjustment measures are applied.

But for the moment, most financial institutions reject these recommendations, since the only bank that currently markets a reverse mortgage is Caja de Ingenieros, which has kept this product in its catalog since 2007. Some private companies, insurers mainlyThey also offer this service, such as BNI, Caser or Catalana Occidente. As indicated by the financial comparator HelpMyCash, this shortage may be due to the uncertainty that was generated after the 2008 crisis and the obligation to provide independent advice to the client. Other entities such as Bankinter, VidaCaixa, Santander or Mapfre have shown interest on the product in recent months or have acknowledged having analyzed it.

NOT ALL ARE ADVANTAGES

Although it is true that reverse mortgages can serve as financial support for retirement, you must be careful and inform yourself well before hiring them, as it is a product that has its peculiarities. It is an instrument aimed at people over 65 years of age in which the client Mortgage your home free of charge to collect a monthly rent. It works, therefore, the opposite of a mortgage loan, since it is the bank that pays the borrower.

This means that the house must be mortgaged, so when the owner dies, the property continues with that burden, forcing the heir to choose what he wants to do with it. If you want to keep the house, you have to return the money to the lender to pay off that mortgage, with which you will have to pay what the holder would have received plus the interest that has accrued on that amount. On the contrary, if you do not want the property, you can sell it, provided that the contract admits that option, or give it to the entity so that the debt is fully paid. In both cases, the heirs they will not have to pay any commission for the cancellation of the debt.

In addition, it must be taken into account that the reverse mortgage has a specific termTherefore, when it ends, the client will stop receiving the rent. In case of contracting a separate life annuity insurance, payments will continue to be made even with the term expired, although the rents will be lower.

DEMAND

During the past year, reverse mortgage transactions were formalized for 30 million euros and the demand has grown so far in 2020. At least it is what they say from Optimal Seniors, who detail that between March and September they have been registered 23% more applications compared to the same months last year.

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