One of the main agendas of the Bolsonaro government, pension reform, is controversial. At the same time as the agenda is discussed and politically articulated, other alternatives are being studied, such as reverse mortgages, which can remedy the need for income in the elderly of a part of the population that owns real estate.
Reverse mortgage is a common and very strong practice in developed countries like the United States, Canada, Australia and Spain. Through it, the elderly who own a paid off property can earn income (or supplement it) without relying on government subsidies, in the case of Brazil, without retirement by the INSS.
In the US, it is allowed to owners age 62 and older and it represents a $ 55.1 billion market. In Brazil, the possible rules have not yet been defined, but they should not differ so much from the policies of other countries.
Understanding this modality is important, as INSS retirement as we know it today may cease to exist and only 58% of Brazilian adults have a good level of financial planning, data of concern that were studied by the Organization for Cooperation and Development. Economic Development (OECD).
We have made a checklist of good financial education practices for those who want a healthier relationship with money and begin to better understand the credit options offered today.
In short, reverse mortgage is a credit option that can be offered by financial institutions. Even still in the study phase, we raise the operating trends of this modality in Brazil.
How Does Reverse Mortgage Work?
Reverse mortgage works as a loan in which the property is granted to a financial institution. This institution pays the elderly who can choose two ways to receive:
Lifetime Income : The elderly will receive a lifetime monthly income in exchange for their residence as a guarantee to the bank.
Single payment : the elderly will receive the amount related to the value of the property in one go.
After this payment, the property owner continues to live on site. However, the creditor becomes entitled to the property if the owner comes to death.
As long as you pay your debt to the institution, there is the possibility of the owner of the property, at any time, terminate the loan agreement.
In Brazil, it is believed that this product will appeal to the middle class, as low-income people do not have their own home, and high-income people generally do not need this money.
Secured Credit vs Reverse Mortgage
It is different from Home Guarantee Credit , also called refinancing and offered by Seecredi. They look alike, but there is a difference that is paramount when comparing them.
The main incompatibility between the two modalities is that the Home Security Credit can be made at any time of life, offering the full amount of credit. Reverse mortgage is an option only for those who have already reached the old age, allowing the installment credit for a pre-established period in contract or a single amount.
By definition, secured credit (CGI) has lower interest rates than those offered by other types of credit, longer payment term – up to 180 months – and quick approval, as the service can be contracted online and the money arrives at your account within 10 days.
It is ideal for self-employed professionals, small entrepreneurs, investors, people looking to renovate / build or general homeowners.
We made an ebook for you to understand all about CGI. If you are interested and curious to know more, just click here to download .