Reverse mortgage is gaining more and more popularity in Poland. This is a relatively new financial service that has been known for years in other countries.
A reverse mortgage enables the elderly who own the property, to obtain additional money for any purpose. What is an inverted mortgage? What are the pros and cons? What conditions must be met to use this service?
Reverse mortgage – what is that?
A reverse mortgage is a financial service that allows you to raise additional funds for your own use, for example as a supplement to your pension. As a rule, to receive money from real estate, we must first sell it. In the case of an inverted mortgage, another mechanism is used.
An inverted mortgage allows you to use and live in a property as well as receive funds at the same time. Without having to sell a house or an apartment. In other words, it is a lifetime loan against real estate.
The owner of the premises transfers the property to the institution providing financial support. In return, the institution pays the owner a set amount of money – in the form of installments or a one-off payment.
Reverse mortgage – how does it work?
The person who owns the property must go to a bank or other financial institution and apply for a reverse mortgage. Granting an inverted mortgage begins with determining the value of the property. The financial institution then sets out the conditions under which it can grant the customer a benefit. When both parties decide to sign the contract, the institution becomes the creditor of the mortgage established in the land and mortgage register. Officially, the recipient is still the owner of the property – until his death. He also receives the right to live for a lifetime. In addition, the recipient is paid a certain benefit – in one part or in the form of equal monthly installments.
After the death of the owner of the premises, his heirs have the right to repay the mortgage and thereby take over the ownership. If they are not interested in such a solution, the financial institution is obliged to pay them the remaining funds that were to be paid to the deceased beneficiary.
Reverse mortgage is primarily a way to raise the living conditions of older people. This service is popular in some European Union countries, including in Great Britain as well as in the United States.
Reverse mortgage – for whom?
Reverse mortgage is a financial product that was created primarily for the elderly and those who have very low benefits from which they cannot independently support themselves with dignity. This service can only be used by people who are the legal owners of the property.
Reverse mortgage was created as an alternative to the so-called annuities. The introduced provisions, which regulate reverse mortgage issues, are to protect the interests of people using this type of service. This financial product can only be offered by institutions that are subject to the supervision of the Polish Financial Supervision Authority (KNF), for example banks, branches of foreign banks or credit institutions.