The only question is when and what (as is usually the case in practice) errors and shortcomings will become apparent. And will elderly people start saving their apartments not to grandchildren but to banks?
Let’s try to describe in a nutshell what an inverted mortgage will consist of. The new regulations are to regulate a specific loan, whereby people over 60 give away (maybe simpler – save) their apartment to the bank (the right of ownership, perpetual usufruct of real estate or cooperative ownership right to the premises).
The bank will pay them a one-off cash equivalent
Or spread payment in monthly installments. And the first question arises – at the outset, the recipe of the age limit is completely incomprehensible to me.
Why was it established at the age of 60? And why not 59. or 61.? Why can’t someone who wants to improve their existence and is 54 years old? What is worse than 60 years old? These and other questions, as usual, bode a few years of “regulation” of regulations.
Polish legislation has accustomed us to the fact that the newly introduced regulations are never perfectly suited to reality. I would like to draw your attention to the fact that similar systems have been operating for years in, for example, the USA. To sum up – are you 60 or older? Do you have a flat If your bank likes the bank, you can promise it to them and have money for it now?
It’s credit all the time
The exact terms and regulations of the payment itself are still not set. However, we must remember that it is simply a loan, not a swap. And as it happens with loans, the bank will be able to secure its interests perfectly. What can you expect then? Certainly fussing about qualifying an apartment as attractive security for the bank.
I would not be surprised if the bank priced real estate very carefully. You can expect a host of “their” appraisers who will have an exclusive appraisal (as is already the case with some bank valuations). Therefore, there are many indications that when we bring our own property valuation, we will be cleared away with it.
If it is, as we already know, a loan, it will have an interest. Therefore, the money we receive will have to be reduced. There is a threat of hypothetical assessment of the remaining years of the owner’s life or even his state of health – as factors determining the conditions (it may take a dozen or so or several decades for the apartment owner to die).
Another threat is the very belaying assessment of future changes in real estate prices, which, however, is in the bank’s interest. What impact will we have on whether the bank will consider that real estate prices will fall sharply in the next few years?
What is shining from outside is not gold
Despite the really great understanding of banks and the appreciation of their fundamental role in the world of finance, there is a fear of how this environment will treat the customer – let’s call him – specific. It is a tempting attempt to use the frequent ignorance of the meanders of the modern banking world in relation to the elderly.
We must also be aware that the bank will certainly pass on to our commission and legal costs – such as establishing a mortgage. Adding the average market interest of analogous – ordinary loans, it turns out that the bank really “pays” us about half of the market price of the flat. The calculations show, therefore, that for a flat worth around USD 250,000, the owner can count on a monthly installment of only USD 500.
Another problem is the question of what will happen to the apartment when, after signing the relevant agreement, the transaction beneficiary dies, e.g. after a few months.