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What is a lifetime mortgage?

Do you know what a lifetime mortgage is?

Discover this new trend in today´s post!

You may have already heard about the lifetime mortgage, a very attractive and increasingly common trend in real estate market. But what is it exactly?

Let's say it´s a special type of sale focused on the elderly, in which an investor buys a property but the seller can continue to live in it (retains the usufruct.) In this type of operations the investors are usually insurers or specialized real estate agencies. The process is the following. The agencies calculate the life expectancy of the seller and compare it to 70% of the value of the property. As the property is not sold at 100% of its value, the seller is guaranteed a monthly rent. There's no doubt, this is a great condition!!

Now that you know what it is, you will probably be interested in knowing who it´s targeting.

What is the profile of the seller?

For these type of operations, there are only two requirements. One, to be over 65 years of age and two, to be the owner of the property. It´s a perfect solution for those pensioners who do not have heirs and have low pensions. They get an extra income, keep their house to live and investors benefit from a good business opportunity. All happy!

The owner will not only continue to enjoy his home, he will also be unconcerned about some responsibilities that after the sale, will move onto the buyer. The investor will take care of some payments like the property tax or the community fees.

This trend has its pros and cons. It is subject to uncertainties that are not in our hands. Premature death, longevity, are things that we can´t prevent and that's the reason this type of mortgage, for the moment, is only carried out in big cities in locations of high demand.

It has reached Spain, Madrid, and will soon get to Mallorca !!
Published: 24 May 2017

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