More cash in old age – with reverse mortgages
Many seniors want to afford things in their old age or financially support their children and grandchildren. However, their pension often barely covers their living expenses. Reverse mortgages offer homeowners a way to supplement their income. But how does it work?
What is reverse mortgage?
Reverse mortgages are actually not a new concept. Nevertheless, they are only now becoming increasingly popular in Germany. Essentially, seniors sell their property but can continue living there, meaning they retain the right to reside in it. Sellers can choose between a large lump sum payment or a monthly annuity. The right to reside in the property can be for life or for a limited period. This is entirely up to the sellers. Sellers thus gain an additional income. For buyers, it presents an attractive investment opportunity.
How is the reverse mortgage calculated?
The annuity payment naturally depends on the property's value. Therefore, to avoid missing out on potential income, it's advisable to know the property's value. A professional real estate agent can help with this. Their years of experience and extensive market knowledge will determine an accurate valuation. Sellers can then choose between a lifetime annuity, a fixed-term annuity, or a lump-sum payment. Even with a lump-sum payment, a lifelong right of residence can be granted. The monthly annuity payment is calculated based on the chosen annuity model.
What are life annuities and fixed-term annuities?
With a lifetime annuity, the seller receives a lump sum payment and a monthly annuity for life. The amount of the annuity depends on the size of the lump sum and the seller's statistically expected remaining lifespan. A fixed-term annuity also involves a lump sum payment and a monthly annuity. However, the annuity payment period is specified for a particular duration.
Which model is right for me?
Which model is right for you depends on your personal preferences and wishes. Do you want to pay money to your children and grandchildren or fulfill a dream? Is your pension already sufficient to cover your living expenses, but you need a larger sum of money? Or would you like to improve your standard of living and supplement your pension to do so? Do you want to spend your retirement in your own home or move into age-appropriate housing in the foreseeable future?
Are you interested in reverse mortgages? Contact us now for a consultation. Together we'll find out which model is best suited for you.
Didn't find what you were looking for? Then read on here:
https://www.faz.net/aktuell/wirtschaft/wohnen/immobilienverrentung-haus-gegen-rente-14993814.html
https://www.finanzen.de/news/immobilienverrentung-bietet-menschen-eine-neue-form-der-altersvorsorge
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.
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About the author
Harry Mohr
Real estate agent (Chamber of Industry and Commerce)Harry Mohr, author of this article
