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THE REVERSE MORTGAGE IN 5 POINTS

Reverse mortgages have undoubtedly been a controversial topic. In the current scenario, with the pandemic of the virus known as COVID – 19, the economic crisis that this has caused, the health crisis, the social inequity that has plagued the country throughout its history and other related complications, the national government has tried to find different solutions to these problems, in that sense, has issued a large number of decrees and new regulatory possibilities, we as a law firm, we see the need to interpret and explain them to the community, to contribute from our field of knowledge a grain of sand for the solution of this situation.

Therefore, we will explain the figure of the reverse mortgage:

  1. Purpose and requirements: This is a figure intended for people over 65 and its fundamental purpose is to ensure that they have sufficient income to face, financially their old age years, either to supplement their pension or to access in the event that they have not achieved it during the rest of their lives.
  2. A reverse mortgage is a loan that is secured by a mortgage on real estate owned by the elderly, who will continue to live in the property while receiving a monthly rent.
  3. Possible annuity modes: three different forms of annuity can be presented, namely, life annuity, temporary and single annuity, respectively meaning the following: income limited until the death of the beneficiaries, income limited for a certain amount of time and a single or full amount delivered at a single time.
  4. Access to reverse mortgages: to access this mechanism, it is important to approach a financial institution that is currently offering this service.
  5. Options of the heirs: once the death of the beneficiaries of the mortgage is consolidated, their heirs will have three options to cancel the financial obligation, namely, they may pay the debt from their own resources, sell the property, pay the debt and keep the surplus if it exists, and give the property as part of the payment.

 
We hope that this new credit instrument will be clearly defined and explained to all parties.
 
Finally, we would like to take a little license in this article and present an opinion on the mechanism. We would have to say that it is necessary, given the chilling figure mentioned by the minister during the presentation of the plan, which is that 40% of the elderly population does not have an old age pension.
However, we would like the government to find other mechanisms to solve the risk of an old age without resources, other than indebting its population. In any case, we hope that access to this type of mechanism is measured and conscientious, and that the authorities regulate it so that it is effectively applied as a response to a social need and not merely as a business for some private entities.
 
AUTHOR: SANTIAGO PINZON SOSA.

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