The reverse mortgage is an existing option for people who are about to retire or who already receive a pension allowing them to have additional income. use owned property as collateral. When the beneficiary dies, the mortgage is paid off and the heirs can pay the fees and interest, otherwise the bank will keep the house.
Although it can be very attractive to keep your home and receive a sum of money – whether monthly, in a single payment or with a mixed system – it is practical know all the conditions and what are the advantages that the different banking entities obtain from this type of mortgage.
Banking advantages
As iAhorro experts explain, Banks do not grant reverse mortgages altruisticallybut they make a profit. These goals are achieved in several ways. One of them is through accrued interest which, unlike a traditional mortgage, are added to the borrowed capital each month, so that the debt increases over time.
On the other hand, banks also make profits from reverse mortgages. commissions and expensessince they end up including appraisal fees and can sometimes be subject to an opening commission. From this portal specialized in savings, they explain that in this way “the bank ensures a profitable operation because it will recover the housing or the money (with interest) when the borrower dies or decides to cancel the mortgage”.
Ultimately, this operation presents a number of disadvantages such as high interest, upfront fees, limited loan value (60% of the estimated value), risk for heirs or lack of clear information about the product. Additionally, they explain that due to inflation, the money you receive eventually loses value with the passage of time.
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