The increasing life expectancy together with an unsustainable pension system has already led the Bank of Spain on several occasions to bet on the promotion of the to guarantee extra income to the longest-lived people, eight years after the entities left to market this product in our country. These mortgages consist of clients over the age of 65 who own a home and have already paid for it, mortgage a percentage of it to receive liquidity with which to support themselves financially for the rest of their lives.
The client who takes advantage of this type of loan can receive the amount to complement their income either through a single initial payment, monthly or by combining a payment at the beginning and a monthly rent. The average amount received per month by users who have this product in our country is around 300 euros. “If we take into account the average life expectancy (83.3 years in Spain) in those 13.3 years, the beneficiary would receive a maximum of just 18.4% of the value of the home (17.6% in the minimum) “, according to the II Mortgage Barometer prepared by Asufin (Association of Financial Users), which analyzes for the first time the characteristics of reverse mortgages. Likewise, the document details that if he lived longer, the percentage would be higher, but it would always be too low to guarantee the recovery of the property. In cases of very prolonged survival of the beneficiaries, it can deliver percentages of up to 30%-35% of the home, generating debts that would not exceed, except in very exceptional cases, 60% of the value of the home. The calculation is made for people aged 70 and with a home valued at 270,000 euros.
Likewise, among the peculiarities of these reverse loans, it is worth noting that the interest rates at which they are marketed in Spain are three times higher than those applied in a normal mortgage. Specifically, the average is 6.38% APR, compared to the 2.35% APR that banks currently offer for variable mortgages that they give to people between 65 and 70 years of age and 2.37% APR, in the case of fixed
At the moment, Spanish banks are reluctant to put this type of mortgage back in their shop window, although entities such as Bankinter raised it in their day. The companies that market these products in Spain are, above all, Óptima Mayores, Vitalitas and Cáser. However, EY considers that the reverse mortgage market will triple globally in less than ten years.
The entities, reluctant
Among the reasons that banks justify not to market reverse mortgages, three stand out. In the first place, the entities fear that once the owners of the house die they will have to keep the property if their heirs do not pay the debt generated or reject the inheritance, this after the intense work carried out after the crisis to clean the brick of their balance. In addition, they consider that this product can increase litigation, since if the client dies soon and the heirs cannot assume the debt, in the end the entity keeps the property in exchange for a few months of having been giving an income. Finally, the third argument against, and perhaps the most obvious, is the lack of a market that still exists. From the entities they remember that Spain is a country of owners and, after years having paid for their homes, it is difficult for them to part with them at the last minute.
In Spain, reverse mortgages are offered to people between 65 and 100 years old, with the average age of clients being around 77 years old. The average amount that is lent is 180,000 euros. And this product has not yet reached the rural world, being marketed above all in provincial capitals. By cities, Madrid is in the lead with the largest market share (38% of the total); followed by Barcelona (28%) and Valencia (12%).
The type of subscribers are mostly elderly couples (48% of the total), then women who live alone (38%) and, finally, men who live alone (14%).
As for the liquidity it offers, the average is 30% of the appraised value of the home. Once the beneficiaries of the product die, the heirs have the option of paying the debt generated or selling the home to be able to afford the return to the company.
Facebook Comments
Disqus