Reverse mortgage? What is that?

The cost of living is constantly rising. As a result, German pensioners are receiving less and less in return for their pensions. This makes it difficult for many to maintain their accustomed standard of living, let alone fulfill any additional desires. However, property owners have the option of improving their situation through a reverse mortgage.

Owning real estate is considered a good form of retirement savings. But few people are familiar with how to capitalize on their own home without having to leave it.

What does reverse mortgage mean?

In this model, owners sell their property while simultaneously securing a right of residence, either for life or for a specific period. Various agreements exist that can be flexibly negotiated between owners and buyers. This also applies to the type of reverse mortgage, which can be a lump sum payment, a regular annuity, or a combination of both. This allows seniors to generate additional income, while representing an attractive investment for buyers.

Pension calculation

The pension calculation is based on the property's value, which can be determined by a qualified real estate agent. This calculation depends on the chosen annuity model: Should it be a lifelong or fixed-term annuity, what is the amount of the lump sum payment, and what is the desired monthly payment? The duration of the right of residence also plays a role.

What are life annuities and fixed-term annuities?

With a life annuity, the annuity is paid for life. Its amount depends on the lump sum payment and the statistically expected lifespan of the seller. A lifelong or time-limited right of residence affects the value for buyers. With a fixed-term annuity, the duration of the annuity payments is specified, and the right of residence can also be lifelong or time-limited.

Which retirement model is the right one?

Choosing the right model depends on your personal circumstances and needs. If you want to treat yourself to something special or settle your estate early, a large lump sum payment might be a good option. If your pension isn't enough to cover your daily living expenses, a smaller lump sum or a higher monthly pension could be more suitable. Your future housing plans are also crucial: do you want to stay in your current home for the rest of your life, or are you considering moving to an age-appropriate, barrier-free apartment? Professional advice from a real estate expert can be helpful in this regard.

Do you need assistance with your property search? Contact us! We'd be happy to advise you.

Notice

For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

Photo: © Wordliner/Image created with OpenAI's DALL·E.