A reverse mortgage enjoys a growing interest in Poland. Such offers have not been available before, which also increases curiosity. What exactly is the reverse mortgage and what are its advantages and disadvantages?
A mortgage is the establishment of a pledge on real estate. Such a pledge often occurs when we take a loan or a mortgage. If we do not pay off our obligations then, a bank or a non-bank company that lent us money can take over the property.
A reverse mortgage is something else.
In this case, we deal with the reverse credit, because the owner of the property receives money, but after his garbage, the property becomes the property of the company that paid the money. Then this company – a bank or a non-bank company – becomes full owners of the real estate, unless the heir decides to buy it back.
A reverse mortgage – who is the best for whom?
Such offers as a reverse mortgage are selected primarily by the elderly or those who have small benefits and are unable to maintain their own. Of course, to be able to use such a service, we will have to be the owners of the property that will secure such a transaction.
Of course, there is one more issue mentioned here, namely the decline. In Poland, the property is usually a component of the estate, so conflicts of interest may arise. For example, an elderly person chooses an inverted mortgage because he lacks money and does not receive financial support from his children and grandchildren, who would like to receive property in inheritance.
Let’s focus on the advantages and disadvantages of this type of offer. Checking them will help you decide whether the reverse mortgage will be a good solution in your case.
Advantages of an inverted mortgage:
• extra money – this is the most important advantage of a reverse mortgage for older people and those with low benefits – old-age and disability pensions because monthly mortgage will allow a significant improvement in the quality of life
• one property is enough – we do not need to have two or more properties to use a reverse mortgage, we can also use the one in which we currently live
• you do not need to be creditworthy – in addition to having a property that can become reverse mortgage security, you do not have to meet additional requirements
• the contract may be broken at any time – if however, we do not want to continue using the reverse mortgage, in this case, we can terminate the contract without consequences, but we must return the funds collected, purchasing the property back
Disadvantages of a reverse mortgage:
• after the death of the person signing the contract, the property becomes the property of the bank or the company offering the reverse mortgage – this may cause problems with the decrease
• the amount of the payment is not always very high – it all depends on the value of the property