30 Apr What is a reverse mortgage?
Talking about retirement is a little mentioned topic and it may be that we consider it unimportant, because “we will think about it when we grow up.” I think that the knowledge we have of the advantages of pensions and the fear that we have of growing is also little.
Today, people’s life expectancy can exceed 80 years and workers of working age (15-65 years) are not in formal jobs that help them create that pension. So it is super important to create and know alternative plans.
But if you are in an advanced age, or have never had a formal job that gives you access to a pension, reverse mortgage could be your alternative plan. You do not know her? I will tell you a little about it.
What is a reverse mortgage?
The reverse mortgage aims to increase the income of the elderly through the rent of their home, while still living in it. Sounds interesting right? But, despite being a good option, it has a whole process and some disadvantages.
First of all, to consider this plan, you need to own a home. In case it is your current residence, do not worry because you will be able to continue living there.
Once the financial institution or the bank authorizes your reverse mortgage, an income, that you will receive monthly, will be negotiated . To define it, the valuation of the home, the age of the person requesting it, and their partner/spouse will be taken into account. Sometimes factors such as tax payment, notary payment, among other things are considered..
Types of reverse mortgages
Since you have the income determined with the factors mentioned above, it is important to know that there are three types of reverse mortgage:
- Lifetime: in this modality, the owner will receive a monthly income for the rest of his life.
- Temporary: in this modality, the owner will receive a income in the given period until the housing value is met.
- Single arrangement: in the latter mode, the owner receives a single payment for the value of the house.
In case you want to cancel it, don’t worry because there is also the possibility. When applying for the reverse mortgage, you do not waive your right to own the home. Therefore, if you decide to cancel it, you will only have to pay the bank what they have given you until that day for your home.
So, as we already mentioned, you are not losing your right to the home. What happens when the owner passes away? The property passes to the heirs without any problem, but, just as they inherit the property, they will inherit the debt of this and, therefore, they will have to settle it. For this, they have the option of paying externally and staying with the property, selling the house to pay the debt or making a new mortgage to pay. In the end, the important thing is to pay off the debt.
Now that you know the reverse mortgage option, you can rest assured if you reach adulthood without retirement. However, the best thing will always be to have a plan from a young age so that, when you reach adulthood, you do not have to request debts with financial institutions.
In the same way, if you are looking to invest your money, buy a house with a reverse mortgage it’s a good option. Otherwise you can always invest in cryptocurrencies and spend them directly from your Bitsa card.