In recent years, a new tool has appeared on the lending market - a “reverse mortgage”, a program that can give pensioners and people of age the opportunity to improve the conditions in which they live, at the expense of their real estate.
According to the reverse mortgage agreement, the collateral is property held by the potential borrower. Having evaluated it, the bank offers a loan for the maximum possible amount for itself. Later, a collateral apartment can be sold and repaid. It is possible that the bank will not be able to repay the loan amount in this way, in this case the state comes to the rescue - it pays the difference. In addition to selling collateral, there are other conditions for repaying such a loan.
Reverse mortgages are especially relevant when salaries or pensions are too low, or when the borrower has no children.
Consumer lending is more likely to meet the needs of the able-bodied portion of the population. As for loans for pensioners, it is probably not worth relying on the fact that credit organizations will issue them. Not to mention that it is more than difficult for them to repay “borrowed” funds at bank interest rates.
But according to the “reverse” program, the pensioner has even the opportunity to choose: either get a large amount right at hand, or receive it monthly (it turns out to be a good increase in pension).
The Bank, as one of the participants in this scheme, gives out money, but does not receive, therefore it is called the reverse. The reverse mortgage has a fundamental difference from the classical one - it does not require maintenance, since interest accrued for using the funds is automatically added to the amount of the debt.
It is noteworthy that, participating in this program, the owner continues to live in his own apartment. Basically, borrowers are protected from seizing an apartment in the event of default until:
- at least one of the relatives of pensioners who are constantly registered in the apartment is alive;
- the borrower makes various real estate payments, including taxes and insurance.
I must say that, receiving monthly payments on a loan, a pensioner practically receives the majority, if not the full value of the mortgaged property. This means that after the apartment is sold, the inherited property will decrease many times or completely disappear.
Perhaps someone reverse mortgage resembles a life annuity. But do not rush to conclusions. With a life annuity, an elderly person transfers to another organization or person rights to his property in exchange for material and physical assistance. Such an agreement implies a lifelong payment of funds also in the interests of the person who has assumed these responsibilities. And it is not for nothing that the old people are afraid that those who have concluded an agreement with them may be interested in the quick departure from the life of their “wards”.
According to the reverse mortgage scheme, the bank, on the contrary, is interested in the longest possible life of the borrower: the amount of debt increases with interest. It cannot be ruled out that the borrower himself or one of his relatives, having returned the loan, will restore their rights to the apartment.
This scheme, most likely, can be more in demand among absolutely lonely pensioners with small apartments. In other cases, there are alternative options for generating additional income, for example:
- exchange for an apartment with a smaller area,
- renting out your apartment at the same time as renting another apartment with a smaller area,
- help from relatives, future heirs, etc.
This is a profitable mortgage for the state, because it transfers its obligations to ensure the living standards of pensioners to commercial structures, which fulfill them, however, at the expense of the apartment earned by the pensioner.