Lifetime Mortgage 2023

What is a Lifetime Mortgage?

A lifetime mortgage, also known as lifetime loan, is a type of equity release, a loan secured against your home that allows you to release tax-free cash without needing to move out. You keep full ownership of your property. Lifetime mortgages in Spain are available to homeowners aged 65 or over. You can take the money as a lump sum or as series of monthly lump sums. There’s nothing to repay until you die.

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How does a lifetime mortgage work?

The Lifetime Mortgage is a type of equity release option for people aged 65 and over, who own a home and want to increase their liquidity by keeping their property.

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What are the benefits?

The funds can be received as a lump sum upfront, in the form of monthly instalments, or a combination of both, such as an initial lump sum followed by monthly instalments.
The client retains ownership and the right to use the property.
There are no monthly repayment instalments; the amount is only repaid after the client’s demise or at their discretion.
Financial product regulated by Law 41/2007 aimed at promoting the development of a lifetime mortgage market that enables seniors to utilize a portion of their real estate assets to enhance their income. This product holds immense potential for generating economic and social benefits.

Eligibility criteria for a lifetime mortgage

1. Be over 65 years of age

2. Own your own home

3. Resident in Spain

4. No outstanding debts (the mortgage can be used to cancel previous debts)

5. Only applicable to the first or primary residence

6. Property located in an urban area (> 150,000 Euros)

7. Must have heirs

8. Additional requirements may vary depending on the lending institution

Why does Optima Mayores offer you the best lifetime mortgage?

At Óptima Mayores, we understand that the ideal Lifetime mortgage solution varies from person to person. That’s why we provide personalized advice to help you make the best decision. We offer a range of top-quality lifetime mortgage options available in the market. Our team will create a personalized illustration specifically for you, free of charge and with no obligation. This illustration will present all the relevant details you need to make an informed decision. We will guide you throughout the entire process, assisting with documentation and any necessary formalities or corrections that may arise. Your satisfaction and peace of mind are our priorities.

Other FAQs

  • You are not obliged to repay the money you borrowed.
  • After your passing, it will be the responsibility of your heirs to settle the debt with the institution. The lifetime mortgage is structured in a way that ensures the debt is lower than the value of your property at that time. This design provides a safeguard to protect your estate and ensure that your loved ones can manage the repayment without any financial burden.
  • Heirs will typically have a period of one year to consider their options. During this time, they have several choices:
    • They can choose to sell the property, settle the debt, and retain the remaining proceeds as their own.
    • They can opt for a conventional mortgage to repay the reverse mortgage, allowing them to retain ownership of the property.
    • hey also have the option to use their own funds to repay the debt and keep the house.
  • The lifetime mortgage benefits from subsidies under Law 41/2007, which includes exemption from IAJD (not to be paid), as well as reduced notary and registry fees compared to a standard mortgage loan.
  • Typically, there is an arrangement fee that varies based on the loan amount to be obtained.
  • In some cases,  lending institutions will cover notary and agency fees, in other cases they will assumed by the borrower.
  • In any case, the expenses charged will be included in the loan itself.
  • The only upfront expense that needs to be paid is the cost of the appraisal, which is incurred once the client has made a decision and we have confirmed the initial feasibility.
  • Our Lifetime Mortgage illustration provides a comprehensive breakdown of all the costs involved in the transaction, including the progression of the debt over time.
  • The financial institution offering the Lifetime Mortgage charges an interest rate on the borrowed funds. This implies that upon repayment, the outstanding amount will include the received amounts, initial expenses paid by the institution, and the accrued interest until the repayment date.
  • Yes, with a lifetime mortgage, you will never lose ownership of your home. You simply use your home as collateral against the bank, but the home remains yours.
  • Yes, unlike a Home Reversion or Sale and Lease Back, a lifetime mortgage provides the flexibility to be repaid at any time. The repayment involves returning the accumulated debt up to the day of repayment to the financial institution.
  • You have the option to rent out your home because it remains under your ownership. Typically, financial institutions require you to inform them about the rental agreement to ensure it is not a lifelong rental or a minimum rent arrangement.
  • The amounts received from a lifetime mortgage are not subject to income tax and therefore are not taxable.
  • However, if a lifetime mortgage involves obtaining an income insurance policy, the monthly payments received as benefits in this case are subject to taxation.
  • In the illustration, we provide you with details on whether the available options include this insurance and the taxation implications associated with it.
  • Immediate life annuities are treated as income from movable capital and are subject to taxation. For individuals over 70 years old, 8% of the annuity amount is taxable. This means that for a monthly installment of €1,000, the client would be taxed at a rate of 19% on the 8% yield. The calculation would be 19% x 8% x €1,000 = €15.2. Therefore, the client would receive a net amount of €984.8.
  • Yes, it is possible to obtain a lifetime mortgage with an existing mortgage if the latter is paid off prior to the lifetime mortgage. In such cases, the lending institutions provide you with an initial capital upon signing the lifetime mortgage agreement, which can be used to settle the existing mortgage.

1. Optima will offer personalized advice tailored to your specific needs, circumstances, and assets, providing a complimentary personalized illustration showcasing the best available alternatives for you.

2. Once you have made your decision, you will need to provide Optima with a series of documents. These documents will be carefully analyzed by Optima to assess the viability of the operation.

3. Once the initial viability has been confirmed, the application will be submitted to the lending institution. At this stage, you will be required to make the payment for the property appraisal.

4. Property aprraisal is made by an independent appraiser.

5. Once the property has been appraised and the operation thoroughly analyzed by the lending institution, they will issue a binding offer outlining the terms and conditions of the lifetime mortgage.

6. The transaction is formalized by signing the necessary documents before a notary.

7. The laon amount approved will be sent to your account.

After the death, the property does not belong to the lending institution.

The property becomes part of the estate along with the debt that has accumulated up to that point. The product is designed so that, at that moment, the debt is typically less than the value of the property, and the heirs can benefit from it. They can either sell the house to pay off the debt and keep the difference, or if they wish to keep the house, they could apply for a regular mortgage to cancel the reverse mortgage. Naturally, they could also pay off the debt with their own resources if they want to retain the property.

Heirs usually have up to one year to decide what to do because the reverse mortgage typically comes due twelve months after the last holder’s death.

If you are looking for more information about reverse mortgages and other solutions for the over 65s, the Óptima Mayores team is at your disposal.

Download the Lifetime Mortgage Guide

An essential document to learn about this financial product

An advisor will contact you without any commitment.

They will provide you with all the information you need.