It does not curdle. Despite officially taking more than a decade in the Spanish market, the so-called reverse mortgage –one of the tools with which it is possible to finance a private pension, alternative to public subsidies for retirement– it is relegated to the purest anecdote. According to the General Council of Notaries, in 2017, only 31 loans of this type were set up in Spain, consisting of mortgaging a property, so that the beneficiary receives a sum of money that only his heirs will return, with interest.
On the contrary, and in the same period, some 39,000 were subscribed in the United Kingdom, which represents an increase of 41% compared to 2016. A vertigo growth rate, which is reflected in an increase of the same proportion of the total lent that, according to data from the British entity Key Retirement, went from 2,150 million pounds (about 2,430 million euros) to 3,010 million pounds (3,403 million euros). To explain the failure of this tool in Spain (its best provision was in 2009, when 780 were hired), the experts evoke different causes, both on the side of the entities that could promote it, and on its target audience.
The basic condition for subscribing a reverse mortgage in Spain is having reached 65 years of age or having a severe dependency. By placing as collateral a home of which he owns, the borrower receives money through periodic provisions or in a single delivery. The particularity of this mortgage lies in the fact that, instead of being returned little by little and diminishing over time, the debt accumulates. The beneficiary continues to enjoy the home while receiving the loan money, until he dies. So, it is their heirs who will be at the crossroads: to extinguish the debt they can pay out of their own pockets, sell the house or request another loan. They could also give up the legacy. In this case, however, the bank would execute the mortgage and keep the property.
If in Spain there are 8.8 million people aged 65 or older, of whom –according to the INE– 89% hold the property of a home, a report from the Foundation for Financial Studies (FEF) shows that 77% of those over 60 have never heard of the reverse mortgage. For its authors, in the lack of development of this product weighs, in addition, its complexity, a market scarcely mature, the real estate crisis, the initial expenses and additional insurance that increase the cost of the operation, among others.
In opinion of the general secretary of the association of consumers Adicae, Fernando Herrero, influences also "a cultural factor by which the people, to his death, does not want to leave a house with loads and to force his heirs to assume the contracted debt". "Our consultancy has a very strong demand for this product", says, on the contrary, Ángel Cominges, CEO of Óptima Mayores, a company specialized in reverse mortgage. "But until now we could not place it for a very simple reason: no credit institution or insurer in Spain wants to market it", ditch. After reaching an agreement with the Portuguese bank BNI, Óptima Mayores is now promoting a loan, which was launched in September, whereby a 75-year-old person who mortgaged a home valued at 400,000 euros, could receive up to 135,000 euros to the firm or 810 euros a month. When it comes to numbers, it is evident that a savings instrument with these characteristics can be of particular interest to owners of houses of a certain value up.
Yes, month after month and year after year, the owner of the house would pile a debt to which an APR applies –equivalent annual rate, that is, the interest rate that includes the expenses– of 6.02%, and that his relatives would inherit. In its study, the FEF also pointed out the "possible claims and risks that damage the image and reputation of the entities, as well as the balance sheets", among the causes of the wreck of the reverse mortgage.
That the barriers are placed more on the supply side is a concept that Herrero shares, for which the lack of transparency is one of the keys. "When entering a bank branch it is impossible to find information about reverse mortgages, we will never see a brochure about them. Its marketing seems secret, while some entities offer them through the Internet, an inappropriate channel since only a tiny percentage of Internet users is over 65, "he criticizes.
In the opinion of Herrero, the "bad conditions" to which this product is offered in Spain – "of zero risk for the entity that grants it" – explains to a large extent its very scarce diffusion. Among them, highlights the "imposition of insurance with a high single premium" and the possibility that, "if the valuation of the house is lower than the payments made by the bank, this claim the difference."
For this reason, it is advisable to look closely at not only the associated costs of the contract or related products, but also the relationship between the price of the home at the time of contracting the reverse mortgage and the income committed by the entity. In Óptima Mayores, this gross ratio (which must be subtracted notary expenses, registration, agency and commission opening of 1%) ranges between 26% and 46% in the case of a single owner, and between 23% and 43% if there are two, depending on the age of the borrower.
The truth is that the reason why the reverse mortgage does not convince the Spanish does not lie in its tax treatment because, to encourage hiring, the law that regulates this instrument, approved in 2007, provides some important benefits. The money obtained in a single payment does not pay in the IRPF, because it is not considered income, and the subscription is exempt from Documented Legal Acts, a tax object of a recent and very famous judicial controversy and of a royal decree that Congress approved last week. Strong reductions of notarial and registry fees complete the tax advantages associated with this tool.
In spite of everything, Cominges foresees a bright future for the reverse mortgage, and not only for these incentives. "In a few years we will reach the volume of the United Kingdom and we will surpass it", he says, and he is convinced that this result will be achieved through a product that, like the British, also contemplates the possibility of receiving all the capital borrowed from a time. A novelty with regard to the single monthly rent that, in his words, has been the usual in Spain until now. An overoptimistic forecast?
Be that as it may, Herrero prefers to emphasize another peculiarity of the reverse mortgages that are offered in the United Kingdom: the user can not subscribe a product of this type if he does not prove "having been advised and informed by social workers or consumer associations that monitor and independently examine the profile of savers. " For the secretary general of the Adicae, this model is "the only admissible".