Reverse mortgage: what exactly is it?

A reverse mortgage is a new financial instrument. An act on reverse mortgage loans was passed several years ago, yet there are still many misunderstandings and myths about it. Find out what this type of investment involves and whether it is worth considering.

What is a reverse mortgage?

The act on reverse mortgage loans came into force in 2014. It is aimed at people who own property. They can obtain additional funds and spend them on a purpose of their choice. A reverse mortgage is a form of lifetime loan secured on a property. The residential premises are transferred to the bank. In exchange for the transfer of ownership, the institution pays the owner a specified sum of money. This may be paid as a lump sum or in agreed instalments. The value of the flat or house is determined by the bank. After the relevant agreement is concluded, the bank becomes the creditor under a mortgage entered in the land and mortgage register (księga wieczysta), but the beneficiary remains the owner. The beneficiary also has an inalienable right to use the residential premises for life. What happens when the owner dies? The heirs have the right to repay the mortgage loan and take over the ownership rights. The solution is aimed mainly at older people.

SEE PROPERTY LISTINGS IN SOSNOWIEC

Who can use a reverse mortgage?

Any natural person can take out a reverse mortgage loan. Age is not a criterion here. The main condition is owning a property. The beneficiary may also be a co-owner of the residential premises. A person applying for this loan will not be checked with BIK (the credit information bureau). Creditworthiness does not have to be demonstrated. Income from this solution can be treated as a supplement to a pension. Calculating the amount of the benefit is not simple. Many factors are taken into account, for example: the value of the property, age, the chosen form of payment, sex and the owner's state of health. A reverse mortgage can be a way to obtain an additional inflow of cash. This solution is most often chosen by people without children. The solution has its supporters and its opponents. Funds from the benefit described are tax-free. If you decide on a reverse mortgage, you will receive from the bank an information form in which you will find all the information on the expected amount of the benefit, the date and method of payment, and the additional costs and obligations arising from concluding the agreement.