Although the reverse mortgage is a product that has been marketed in Spain since 2005, the little promotion that has made the entities that offer it, the lack of knowledge that exists at the branch level of those same entities, and the little financial training that we have in Spain, they cause the reverse mortgage to be charged erroneously with false attributes and characteristics. In fact, most people today who are aware of the existence of the product, is very conditioned, or rather wrong, by the existence of the following false myths about the reverse mortgage.
1. The bank keeps the house
Actually, the entities have no interest in keeping the house, rather the opposite. The home is used as collateral, but the property is not lost at any time. In fact, the product is designed so that when the debt is due (upon the death of the holders), the amount of the debt is less than the value of the home, so that the heirs can satisfy the debt with ease, and also keep a difference in their favor, without the entity having to execute the guarantee.
2. It is a very expensive product
It is a product subsidized by law; the notarial and registration fees are subsidized, and the operation is exempt from the tax of documented legal acts, which must be paid in any other type of mortgage, and which can be a very important amount.
In terms of interest rates, they currently oscillate between 5.30% and 7.50%. It should be noted that these are fixed rates during the life of the loan, so it is not comparable with the variable rates applied to normal mortgages- why not try this out www.evangelistchrisdallas.com/increase-in-payday-loans-only-one-out-of-many-economic-worries Evangelistchrisdallas. If we were applying today for a normal mortgage at a fixed rate, it would not be far from those applied to the reverse mortgage. In addition, in the reverse mortgage, we must consider that the interest is applied to the amounts that are available, that is, very little by little, unlike the traditional mortgage, in which initially practically everything that must be paid is interested which apply especially the amount of the loan.
It is important to remember that the entity does not know when the money will be returned, as it is only due to the death of the owners, and yet the client can cancel the transaction at any time (in which case, depending on the entity, whether or not there are cancellation fees, and if there are cancellation fees, they tend to range between 0.25% and 0.50% of the amounts pending amortization).
In the case of lifetime operations, deferred annuity insurance must also be paid, which is what allows the entity to guarantee payment irrespective of the number of years that holders live. The amount of the single premium depends on the age of the persons and the income to be insured, so it can vary enormously from one case to another. All these expenses, except for the appraisal, are included in the loan amount, that is, the entity lends us the money to be able to pay them.
3. It had its moment of glory, but operations are no longer done
It is true that the financial crisis, and specifically the restructuring suffered by the savings banks, has affected the supply, but the product has not disappeared, far from it. In fact, the entities that currently offer the product offer maximum guarantees, with solvency ratios well above the average in Spain.
These three false myths weigh on the collective conscience, and unfortunately prevent many older people from approaching the product without any commitment, which could facilitate their retirement with more resources, and indefinitely, with a better quality of life.