The mortgage loan was born in the Anglo-Saxon environment as a ” reverse mortgage “, a name with which it is still known to most even in Italy.
It is a form of financing intended for owners of properties over 60 years of age who need liquidity. It is unfortunately not uncommon, in fact, that after years of hard work you find yourself with your own home but without enough money to make ends meet, help your children or face unexpected expenses. Not to mention that for many the retirement is clearly lower than what was the salary, which means radically change their spending habits.
Very often, on the other hand, banks deny personal loans precisely because of their advanced age, not being able to rely on the security of repayment on schedule, or in any case on the stipulation of an amortization plan that respects the minimum life threshold established for the law. Through the mortgage loan, they, excluded from traditional means of access to credit, can take advantage of a financing solution without installments or interest.
How does life annuity loan work?
The lifetime mortgage loan falls into the category of non-finalized loans. This means that no documentation is required to certify the destination of the requested sum. By the way, how much can you request? The figures vary based on two parameters. The first concerns the value of the property, an estimate that is assessed by an expert independent of the bank.
The costs are borne by the applicant, financed by the sum that will be granted. The second concerns the age of the applicant: it may seem a paradox, but the higher the age, the greater the amount granted, which reaches up to half the real estate value.
We said earlier that there are no installments or interest, but we must contextualize the statement. In fact, the interest and expenses payable for the loan are not paid by the applicant, unless voluntary early repayment. Upon his death, the heirs will settle the debt, we will talk about it in more detail shortly.
Mortgage loan: the requirements
To obtain the mortgage loan, only two requirements are sufficient: to be 60 years of age and to own a residential property; requests that propose commercial structures, garages, garages are therefore blocked in the bud. The law does not impose an obligation to be resident, and it is, therefore, possible to mortgage a second home, provided that it is intended for residential use.
However, at the time of submitting the application, documents must be presented, some of which vary according to the credit institution to which the request is made.
This is the list of those essential, valid for all:
- certificate of birth, residence and family status;
- photocopy of personal documents.
- copy of the deed of origin of the home and any certificates of insurance;
- copy of the bank transfer receipt for the payment of the property appraisal;
- declaration by the applicant that he has received all the information on the mortgage loan.
The mortgage lifetime loan is governed by law 44/2015, which does not provide for minimum income requirements. However, it should be noted that banks are free to adopt restrictive criteria in this sense, therefore it is likely that a photocopy of the CUD or of the pension booklet will be required among the documents.
An important clause provided for by the law concerns the signature of the spouse/partner. If the person applying for the mortgage loan has been married or has lived for 5 years or more, both must sign the contract, even if the property belongs to only one of the two. In the event of death, the longest-lived spouse continues to have the right to reside in the house.
Mortgage loan: how much is it?
As mentioned at the beginning, the amount granted by the bank is closely related to the age of the applicant. Of course, even in this case, things can change (but not too much) from institution to institution, but an average estimate sees a disbursement equal to 10% of the value of the property for 60-year-olds, 20% for 70-year-olds, 40 % for 80-year-olds and 50% for 90-year-olds.
Always approximating, in most cases, however, a check of more than 350 thousand euros is not written off, usually within two or three weeks of accepting the request. However, the times may extend up to a few months based on the availability of the bank and the notary, the ease of finding the documentation relating to the property, as well as the technical times for the preliminary investigation and appraisal.
If the application is refused, it is almost certainly an amount that the bank or financial institution considers too high; just renew the process by asking for a smaller amount to receive the approval.
Attention: since it is a mortgage, the owner can obviously continue to live in his property, but he must respect certain constraints. He cannot sell a house, rent it or renovate it, and he cannot add a second mortgage. We also specify that, as with any mortgage, the property ceases to be a potential guarantee in favor of third parties.
Extinction of the mortgage loan
As mentioned, the burden of repaying the debt falls on the heirs or welding, so as to maintain ownership of the property mortgaged, or allow the bank to sell the house and cover the debt with the proceeds. Of course, any excess amounts are paid to the heirs.
In this second case, it is useful to know that if the property is not sold within 12 months, the bank will reduce the price by 15%; if after a further year the problem persists, another 15% share is cut, and so on until the sale is made.
At this point one might ask whether the heirs are required to give consent; in fact, the demand is legitimate, since the repayment of the loan will be up to them. To be sure, the law neither explicit nor imposes any of this, but banks could protect themselves by requesting signed consent. Beyond this, one can guess that it is common sense to inform loved ones of the economic consequences they will have, although hopefully as late as possible.
If you have no heirs, you can still apply for the mortgage loan; after the death of the beneficiary, the bank will acquire ownership of the property, unless the loan is repaid early.
Remaining on the issue of early repayment, this can involve even only a part of the entire sum, and on the extinguished portion the bank will no longer be able to claim interest. As for the methods, you can choose whether to return the money gradually, therefore paying installments, or in a single solution.
Mortgage loan: who is it for?
The aforementioned law of 2015 has lowered the minimum age to apply for the lifetime mortgage loan from 65 to 60 years; undoubtedly an improvement, since you have more time to enjoy the liquidity and pass the mature age without economic worries. However, remember that the lower the age, the smaller the amount paid by the bank.
Another point to be underlined is that the sale of the house ex-post, that is to say to the death of the owner of the loan, can be convenient for the heirs if the value is higher than the debt since they will be able to collect the excess share. Conversely, if the debt is higher than the sale price, the heirs are not required to cover the difference, that is, they do not become debtors to the credit institution. The negative aspect is, however, that you remain with a handful of flies in your hand.
Beyond this, it is certainly advantageous to be able to apply for a loan without having to worry about the installments and, therefore, without seeing a fifth of the pension evaporated every month. If you are experiencing a time of financial difficulty or if you want to supplement your pension and maintain the same lifestyle as when you received your salary, and you have no heirs (or if they agree), or if you have a substantial real estate property can be a valid solution to be taken into consideration, given that many banks include accessory costs in the APR.
We recommend in all cases to evaluate at least three or four quotes from different institutions since the interest rates applied and the conditions can vary significantly. For example, the substitute tax amounts to 0.25% of the amount if you mortgage the first house through a bank, but you can easily reach 2% in the case of a second home mortgaged through a loan from a financial company. Fortunately, there is a tax relief to balance these expenses, ie the exemption from the payment of registration, stamp duty, cadastral and mortgage taxes.