Reverse mortgage
The safest mortgage for you
A mortgage for seniors is an any-purpose loan, secured by a lien on real estate owned by the borrower, and intended for people aged 55 or 60 and over.
Of course, there are also conditions, which are explained in detail below. In short, a mortgage for seniors is available to anyone who owns real estate that is free of any mortgage and worth more than a certain minimum (each insurance company sets its own), and the loan amount depends on the borrowers' age and the value of the property.
The repayment date is flexible: the borrowers can repay the mortgage whenever they wish, or their heirs can repay it within 12 months of the borrowers' death.
From what age can you get a mortgage for seniors?
The minimum age for a mortgage for seniors depends on the lender offering it and its policy. In principle, this is a financing tool for people approaching their senior years, so today the lowest age for a mortgage for seniors is 55. Note that if the borrowers are a couple, the age of the younger borrower is what counts, both in checking eligibility for the mortgage and in determining the loan amount.
A mortgage for seniors can be used for any purpose:
A mortgage for seniors can be used for any purpose the borrower wishes, without restrictions. You can even use it to buy an apartment or other real estate.
The lender will want to know what the purpose of the loan is, to ensure that it is legal and legitimate, but beyond that, there is no prohibition or restriction.
Common examples of using a reverse mortgage
Medical treatments
Income-generating investment – the capital market, real estate purchases, or any other savings or investment
Financial help for your children in buying an apartment, or an early inheritance – or any other purpose. You decide.
Payment of debts
Maintaining your standard of living
Repayment tracks in a mortgage for seniors
Each company offers several repayment tracks. Check which tracks are available at each company,
and whether the borrowers can switch between them as they choose.
Common repayment tracks:
No monthly repayments
Also called a balloon track. The loan, including the interest accrued on it, will be repaid on the maturity date, probably by the heirs. This option appeals to many borrowers who do not want to pay every month and prefer that the loan be repaid from the apartment after their death. This is completely understandable, but it is important to consider the consequences: this is the most expensive loan of all, and it will eat deeply into the inheritance you leave your children. A balloon loan is true to its name – its costs keep growing and swelling. Over the years, the principal accumulates compound interest, including the high cost of CPI linkage in times of inflation, as well as interest costs.
Interest-only repayment
Also called a grace period or partial balloon track. In this track, the monthly payments cover only the interest on the mortgage. On the repayment date, the borrowers or their heirs will repay the full principal plus any remaining interest accrued up to that date. This track is offered by almost all companies that provide mortgages for seniors.
Monthly repayment of principal and interest on a Spitzer (equal-payment) schedule
Like a regular mortgage. The repayment is split across the interest tracks you have chosen (for example, 60% prime-rate and 40% CPI-linked, or any other mortgage mix you have chosen).
How is a mortgage for seniors different from a regular mortgage?
Let's start with the similarities: both are loans given by a financial institution against a lien on a property, which means that if the borrower fails to repay, the lender can sell the apartment or house to recover its money (in the case of a mortgage for seniors, only after the borrowers pass away).
Another similarity is the process of obtaining the mortgage – approvals are required from the same bodies, such as the Land Registry (Tabu) and an appraiser, and a lawyer's involvement is required.
This is where the similarities end and the differences begin. One of the main ones is that banks tend not to approve a regular mortgage or an any-purpose mortgage for people without a steady income, such as retirees, whereas a reverse mortgage is a product tailored to them.
Advantages of a mortgage for seniors
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A flexible loan with no time limit.
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Early repayment is possible without exit penalties.
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No obligation to make monthly repayments.
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No mortgage life insurance is required.
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No guarantors needed.
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An early inheritance for your children.
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You do not need to prove your ability to repay.
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Non-recourse loan – the lender can be repaid only from the mortgaged property, not from the borrower's other assets.
The process of obtaining a mortgage for seniors
The process is quite similar to getting a regular mortgage.
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An introductory conversation and setting expectations with the prospective borrower
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Submitting an application for mortgage approval, along with all required documents and approvals
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You will usually have a meeting or conversation to clarify what else is required.
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Valuation by an appraiser
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Approval in principle (sometimes before the appraiser's visit)
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Completing the mortgage documents with a lawyer's assistance
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Transfer of the funds to the borrowers.
The process takes several weeks – it can take about 4 weeks, but may take longer if there are long waits for documents such as a Land Registry (Tabu) extract, a doctor's certificate of legal capacity, etc.
In conclusion
A mortgage for seniors is the most convenient and easiest way for people in their senior years who own real estate to increase their family capital. There is no commitment to fixed repayments or to a repayment date, no intrusive income check by the lender, and relatively few associated costs. The interest rates may also turn out to be relatively low, since the mortgage reduces the risk that the debt will not be paid.
This is an effective way to turn the apartment you live in into a source of income, without having to change any aspect of your life and without having to sell the apartment or move out.
Want to find out whether a reverse mortgage is right for you? Book a free consultation