If you are in your mid 60's or older you might have paid a substantial amount off your mortgage, or be close to doing so. The value of your home may have risen considerably since you bought it, but you might still be short of money to spend, invest or even pay your standard mortgage off.
Equity Release is a way of raising money from the value of your home.
Equity release will reduce the value of your estate.
The Reverse Mortgage is a financial product that allows you the client to have part of the value of your home, using it as collateral.
With the Reverse Mortgage, you can receive the amounts in the form of a single amount at the beginning, in the form of monthly payments, or a combination, that is, an amount at the beginning plus a monthly payment.
You will maintain ownership and use of the home.
The Reverse Mortgage has no repayment installments, and is only repaid after death or if decide to pay it off earlier.
GPS conducts a study to determine the amount you will receive with your Reverse Mortgage.
The Reverse Mortgage allows you to receive the loan in the form of annuities, in a single payment or in a combination of initial amount, plus annuities.
If you wish, you can pay the debt in advance or it is amortized after death.
The obligation to return the loan (capital plus interest) is generated upon death. The heirs have a period of 12 months to do so.
The Reverse Mortgage is subsidized by Law 41/2007, which establishes the exemption of the IAJD (it does not have to be paid), and also the notarial and registration fees are much lower than those of a normal mortgage loan.
With a Reverse Mortgage, at no time will you lose ownership of your home. You simply use your home as collateral against the entity, but the home remains yours.
You can rent your home, because it is still yours. Normally, financial institutions request that they be informed of the rental agreement, to verify that it is not a lifetime rental or minimum income.
Be over 65 years old
The amounts received through the Reverse Mortgage are not considered an income, therefore, they are not taxed.
However, if the operation involves monthly payments, the monthly payments received are subject to taxation.
Immediate annuities are taxed on income from movable capital, with 8% of them subject to taxation (for those over 70 years old). That is, for an insured income of 1,000 euros, the customer would be retained 19% (type) of 8% (yield), that is, 19% x8% x1,000 = € 15.2. The client would receive 984.8 Euros net.