Antonio is 69 years old and four months ago he sold the bare ownership from his apartment in Aravaca. “I wanted to have money available and it is the way to supplement my pension. I am self-employed and, at my age, it was a good way to have capital available for the coming years,” he explained to RTVE.es. They sold it at half its market price and they are not worried that their children cannot afford it. stay with the apartment because “they already have life resolved”: “For what we wanted it was the best option. We had seen the reverse mortgage, but we are not convinced to leave a debt on the property to the heirs”.
Who was interested in the reverse mortgage It went to Joaquín, 79, who signed it for the Majadahonda apartment where he has lived for more than 50 years. “They gave me a down payment of 25,000 euros and now I receive 700 euros every month,” he explains, “and It helps me to supplement my retirement and widow’s pension and live more comfortably“. He not only values his property, but also a library that he has been completing with books throughout his life. He chose this option because he did not want to close the door on his heirs either: “I did not want to sell it, but to keep the property, because I have three children and I want to leave the house and my library to them.
Sell bare ownership of your residences or opt for a reverse mortgage. These are two alternatives that are contemplated every time more people over 65 to increase your income, supplement their pensions and improve their quality of life.
“89% of those over 65 in Spain own a home“, explains Ángel Cominges, president of Óptima Mayores, intermediary and independent reverse mortgage adviser. “Savings have focused on housing and our proposal is to convert it into liquidity to complement their pensions,” he defends.
Industry experts explain that they have seen recent growth in both formulas. The Reverse mortgages have tripled in recent years, going from 111 operations in 2020 to 372 in 2022, the same levels as in the 2008 financial crisis, according to data from the General Council of Notaries. On the other hand, “from December 2021 to the same month of 2022, the sale of the bare property has risen by 38%,” Eduardo Molet, founder and general director of Eduardo Molet Real Estate, told TVE. In this scenario, industry experts expect both formulas to continue growing in the coming years.
The reverse mortgage and the sale of bare ownership, alternatives for the elderly to complete their pension
Nuda propiedad: how does it work and what is the seller’s profile?
First of all, it must be clarified that the right of the owner of a home is divided into two: the right to bare ownershipwhich is solely the title to the property itself, and the right to life usufructwhich refers to the use and enjoyment of the home and also to being able to rent it to third parties, all of this until death.
Starting from that base, this system allows a homeowner can sell the bare propertybut preserving the right of usufruct, so that you can continue living at home until he dies, being able to use the money obtained. When the owner dies, the buyer acquires the entire property and can do with the apartment what he considers. “The person who sells receives an amount of money at one time before a notary and with legal guarantees,” explains Eduardo Molet to RTVE.es. “On the other hand, he loses the property title, that is irreversible, and his heirs are not going to inherit it,” he says. Thus, in case he wants to recover it, he would have to buy it from the new owner -if he wants to sell it- or finally go to the free market.
““The most typical profile is of a person aged 70 or over who wants to supplement their pension, which is usually low”“
¿And who resorts to this form of sale?? “The most typical profile is that of a person aged 70 or over who wants to supplement her pension, which is usually low,” says Molet. “Many times it is the children themselves who come with them,” she qualifies, since they cannot help them financially and they prefer that their parents, with their assets, can have more income to cover other household expenses.
““I am taking advantage of the profitability of the apartment before I die”“
Luis is 70 years old and sold the bare ownership of his apartment in Aluche last July. “I am enjoying the house and, on the other hand, I have extra money that is very useful for me. In some way, I am taking advantage of the profitability of the apartment before I die”, he tells RTVE.es. He assures that it was a simple process, like a normal sale, and he agreed on a price range with the real estate agent: “In the end I I reduced 8,000 euros more and I think I sold it, but at that moment I urgently needed the money to be able to make an investment”.
In Antonio’s case, his relationship with the buyer is cordial and they have to inform you about procedures and meetings of the neighborhood community. “He is in charge of paying the IBI, the house insurance and the extraordinary spills of the floor,” he indicates, but the rest of the expenses, such as electricity and gas, are assumed by them, who are the ones who still maintain the usufruct and make a living in the residence.
¿How the sale price is calculated? Although it depends on several factors and each case, the housing location and, above all, the seller’s age: the higher it is, the more the price will increase. This is explained because, in theory, there is less time left for his death and, therefore, the moment in which the buyer can enjoy the full right to the property is also near. According to a report by the consultancy TECNITASA, a sole owner of the home who is between 65 and 69 years old could sell the bare property between approximately 65% and 75% of its valuewhile someone close to 95 years of age could receive up to 95% of the appraised value.
According to Molet, “if the owners are very old people, the savings on the purchase can only be 12%, but if they are 60 years old it can reach 50%.” Thus, according to his data, if a home is worth 300,000 euros, it will cost the buyer 150,000 euros if the seller is 60 years old, while he would pay 264,000 euros if he is over 80 years old.
Acquiring a home as a long-term investment: this is the buyer
“The buyer is usually a local investor of about 40 or 50 years old who has solvency and available capital, but does not trust the banks and decides to invest in brick, in the real estate sector,” says Molet. He assures that do not usually buy the house and then inhabit itsince in some cases he would have to wait 20 years to be able to do it, but he does it for economic reasons.
““I had some savings and I saw that the bank was not giving me anything, so I decided to put the money in the houses with the hope that in a few years they could be worth more”“
Two years ago, Isidro bought two houses of 70 square meters each in Móstoles and Alcorcón. “I had some savings and I saw that the bank was not giving me anything, so I decided to put the money in the houses with the hope that in a few years they could be worth more.” He bought them 30 or 40% below market value that they had then and hopes to be able to leave them to their children in the future, although he does not rule out reselling them if they appreciate: “Housing goes up as soon as it goes down, I don’t know what will happen. Bare ownership can also be a business and it can go well or badly”.
He bought them from a 77-year-old woman and a 75-year-old man. “The man had an unpaid loan and they were going to repossess his house. With the money from my purchase he was able to pay off his debt and lead a calmer life.” explains Isidro.
Reverse mortgage: a way to leave the door open to the heirs
In this alternative, the owner requests a mortgage on your home and receives an initial amount and a monthly amount from the insurer while living in the property. She is directed to older than 65 years or people who have a disability greater than 33% and is done before a notary. “It is the only product on the market that allows you to obtain income from your home and be able to continue living in it without losing your property.“, explains to RTVE.es Nuria López, director of reverse mortgages at Caser, who also indicates that it is regulated and is signed before a notary. However, “if you do not have heirs, it is still not the most appropriate product”, since in those cases could be of more interest to bare ownership, he qualifies.
The owner can receive the payment in a single, monthly or mixed formula. “When the owner dies, the heirs can recover the property by paying the money in advance by the bank plus an interest rate, which is usually 6 or 7%,” Vicente Varó, director of the financial products comparator, told RTVE.es finect.com. So, the heirs have two options: recover the house o look for a new buyer who to sell it to and, with the money obtained, settle the mortgage with the bank plus interest. The latter is, according to the expert, the one they most often choose.
People wake up – Reverse Mortgage: everything you need to know.
“The price is calculated based on age and the value of the property,” explains Nuria López, “and the older the person, the more they will receive, because they have less time to accumulate debt.” With respect to type profileAlthough there are older people with more modest pensions, in Caser they have noticed an increase in retirees who have had professions with good salaries. “These are people who were used to living well and want to continue doing so,” she says.
In Óptima Mayores they also attend to this type of demand and, as Cominges indicates, their operations are focused on Madrid (28%), Catalonia (16%) y baleares (11%): “Our most common client is a married couple of 76 years on average and with a house valued at around 450,000 euros.” In addition, he explains that many times it is the children themselves who take the initiative.
““Our most common client is a married couple of 76 years on average and with a house valued at around 450,000 euros”“
Rosa is 89 years old and a year ago she signed a reverse mortgage for her apartment located in the Madrid district of Chamberí. “I did not know this option, it was my son who proposed it to me“, he explains, and now he enters 1,000 euros each month, in addition to his pension: “It is good for me to pay a caregiver and even take a trip. In short, to have a life without worries”.
Although he already had a tour in other countries, such as the United Kingdom, this modality arrived later in Spainin 2007, with the introduction in the Mortgage Market Regulation Law, which includes the Mandatory figure of the financial adviser so that clients are guided in this process, a role they play in Óptima Mayores, as Cominges points out. For both experts, the lack of promotion of this product in the country is due to a supply shortage and of disclosure. “There has always been demand, what has been lacking is a bank offer,” defends Cominges, while Nuria López indicates that “more and more is being sold, and it is because more is being known.”
For this reason, one of the challenges in this sector is to pay attention to United Kingdom, where Cominges points out that around 50,000 reverse mortgages were signed in 2022. “Spain is the country in Europe where the most savings are deposited in housing“, he says, “and our goal is to reach the UK figures in the next ten years.”