Monday, 28 July 2014

Is reverse mortgage pays off

Reverse mortgage is still a novelty on the Polish financial market. However, already went through many critical comments, alleging lack of profitability, and even enumerate losses arising from its use. What is a reverse mortgage and whether it really is unprofitable?

Assumptions reverse mortgage

Reverse mortgage is a financial service based, but not limited to housing loans, the transfer, or assignment of rights to real property, usually a house or apartment. On the basis of an agreement between the institution offering this kind of service (the bank), and its customer, there is an agreement in which the customer is poured on the bank of the right to property. This, however, remains in its use until death. The institution, which over the right to property is committed to providing a monthly salary that will be paid for life. Less commonly used is a one-time payment of the whole. The amount of the compensation depends on two main factors - the value of the property and the age of the donor. On this basis, the institution predicts the period in which it will be responsible for payment of wages. Reverse mortgage is intended primarily for people who not only have a right to the premises, but also completed a sixty-year life.

Advantages and disadvantages

Unquestionable advantage of reverse mortgages is access to extra cash, of which it is difficult to retirement. For many financial institutions, older people are not attractive customers, making their access to such loans is difficult. Another advantage of reverse mortgages is that the signing of the contract does not require leaving the house (apartment). Moreover received money from this account are not taxed.

The first drawback of reverse mortgages are limitations associated with the use of the property, because we can not pass close in the fall. But the most important disadvantage is the reduced amount of remuneration received in return for the property. Therefore, the value of the property is determined by the bank on which basis the calculated duty owed​​. This makes the effect customers receive the total amount of 30 to 60% of the value of the house or apartment.

In conclusion, the reverse mortgage is not the preferred solution, because the assumption is associated with loss of a large part of the value of assets. So if you have a property, and the extra cash is needed urgently to us, let us consider a home exchange (flat) on the smaller of the charge difference, or total sales. In the case of the sale will be able to pay the monthly rent and the remaining money by transferring them to the place, can bring additional profit.

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