Reverse mortgage - chance or risk

Abstract

Ageing Europeaean societies are standing before а dilema ofhaving to provide old age pensions to ever increasing group of people. The cuпently functioning system of pensions basing on а state fund. does not seem to Ье doing the job and today's pensioners are not members of pension funds investing on the capital market which were estaЬlished in the 90s. Reverse mortgage is а payment under which the role of а lender and boпower have been reversed. Property owner shall relinquish the right to the property on his death. In the case of а downpayment, its level does not exceed 50% of the value of the property. In retum he will receive а monthly payments or а total downpayment . The amount of the payment depends on how long it will Ье taken and on the value of property transfeпed to the benefactor. As а result, the value of payments will depend on the beneficiary's age. Increasing life expectancy acts against the interest of the payer who will Ье oЫiged to рау longer. That is why an older person will receive а higher amount of payment Differences in life expectancy between men and women also make а difference in the amounts paid. Adverse conditions of reverse mortgage and lack of legal regulations cause а situation in which banks are not willing to undertake such tasks. Thus, reverse mortgage has only marginal importance forbanks.