Borrow against home - you should be aware of

Borrow against home - you should be aware of

Consider before signing a contract possible disadvantages.

The reverse mortgage promises a retired Although money until death, but the concept also has some disadvantages.

House borrow - the seniors on loan abbezahlte cottage

  • The seniors on loan abbezahlte house is not very long. In Germany on the market In the US there is the model as "Eat your brick" for a long time. Translated this means so much like your stones to make money, so you have a nice evening of life.
  • The German version of the reverse mortgage can be described as follows: It provides loans on some of his own four walls and receives a monthly pension. The there are tax free. However, it largely depends on the age, the real estate value and interest rate. It is also a lump sum.
  • Important for retirees is that he remains the owner and can continue to live in his house. As security for the loan is a securitized mortgage. Any interest accrued and amortization defers the lender. Unlike normal mortgage is a debt for the year builds on year. Hence the name for this funding model: reverse mortgage.
  • The repayment of the loan will be due upon the death of the property owner or move to a nursing home.
  • For the inheritors of this model house means borrow to take over the accumulated debt and keep the house.
  • The alternative to this is, the item for sale and repay the mortgage in this way. The Bank may also use the house of course and pay a surplus thereby obtained to the heirs.

Real Estate pension is not ideal for everyone

The principle sounds good. However, does not mean that the owners are liquid. Financial experts estimate that the real estate bond is a subject with a future. A general fitness is not seen.

  • The reverse mortgage is a catch. Property owners can achieve significant additional pension in sufficiently good location with only a valuable property. In addition, the house must be debt-free and in good condition. In the country the opportunities for profitable supplementary pension are rather small.
  • Of course, the retirement of a house has its price. There is a one set of fees. Not infrequently makes the additional pension from 100 to 200 euros.
  • If pensioners borrow a house, does that mean they always get a lower payment than they would, arithmetically is entitled under the current market value and their statistical life expectancy.
  • To borrow the reverse mortgage, or a home, is a relatively expensive product for retirees. In addition to the fees (sales charge, insurance against longevity risk) and the interest rate is not the Best for the loan.
  • If the house is mortgaged and thus serves as collateral for the reverse mortgage, it can be used for other purposes not exceeding safety. The genetic material is reduced in every case.

Financial experts recommend as an alternative to reverse mortgage, to sell the house. With the proceeds you can grow a smaller property. What remains is placed on a rainy day.

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