A bank or other financial institution will pay the owner a monthly or one-time payment in return for the owner to commit himself to waive his property upon death.
10 European Union countries have such an offer (it is best developed in Great Britain). It is also popular in the United States. In Poland, the offer is in the project phase.
This service will be intended for persons over the age of 60 and having one of the following rights:
– property ownership
– ownership of a fractional part of the property
– right of perpetual usufruct of real estate
– cooperative ownership right to the premises
The borrower will be obliged to maintain the property in good condition, i.e. carry out proper renovations, pay rent and taxes on time, as well as insure the property against random events. It is possible for the bank to take over some of the obligations related to property maintenance.
The bank will decide on the calculation and form of loan disbursement and verification of the value of the property during the loan period.
The money paid by the bank can be used for any purpose. When signing the contract you do not need to show creditworthiness – the collateral is real estate. You will not have to pay tax on the funds obtained.
Funds obtained in this way will also not be included in the income entitling to social assistance benefits. In this way, it does not limit other sources of income for older people, it actually increases them. Pensioners in addition to money from GFI (and possibly social assistance) can count on additional funds.
In the event of the client’s death within a short period of time after the conclusion of the contract (which involves the payment of an amount that covers the value of the property to a small extent), the project protects the heirs from taking over the property for a very low amount. The heirs of the deceased will have half a year to repay the loan (the bank will have to provide information on the existence of such a possibility).
The bill provides that the reverse mortgage contract will be able to be signed not only by lonely persons but also by spouses who are co-owners of real estate under marital joint property. The death of one of the people will not cause its dissolution or change in the amount of funds paid. The contract expires only after the death of both spouses.
In a situation where the property will be encumbered with a mortgage, the borrower will be obliged to repay the debt with funds obtained from the reverse mortgage.
Because for now, it is only a bill, it is difficult to indicate its clear flaws. There is a risk that banks or financial institutions will underestimate the valuation of real estate in their favor.
At the same time, the contract will specify the state in which the customer is obliged to maintain the property, which may limit his freedom of use.
It is unknown whether this product will be accepted in Poland. It is not even about technical and legal issues, but about the mentality of the society. In addition to prestige, owning a home for the elderly gives a sense of security. It is not known if these values will be more important for older people than extra cash.
Substantive supervision over the content of the article was exercised by the Institute of Real Estate Management