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It's often the case that older people who have long since paid of any mortgage on their homes want some more disposable income than their pension might provide them with. Local banks have also noted this phenomenon and have begun offering ‘Reverse Mortgages'.
The principle is straightforward: the bank offers a credit line of about 90 - 110% of the value of the property which is paid out over a period of 10 years. Should the beneficiary still be alive after the value of the mortgage has been completely paid out, payments are taken over by a specially created insurance policy. This makes the whole process somewhat expensive, as the insurance premiums have to be paid upon signature of the credit agreement. On top of banking commission and other associated fees, it means that about 10% of the credit is eaten up on day 1.
However, it may still be a good idea for older people who want the security of receiving a fixed amount of money from the bank every month.
The legal heirs of the estate are obliged to pay back the loan plus accumulated interest or to sell the property within a year of inheriting it. That may sound harsh, but it has the added advantage of counting against the value of the inheritance as a whole and thus reduces the inheritance tax payable significantly.
Not every bank offers this facility, and the ones that do often have their own models. It is therefore imperative that you ask questions and inform yourself diligently before agreeing to anything. In case of a language barrier, professional legal advice should be sought.
