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Reverse Mortgage

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11 views2 pages

Reverse Mortgage

Uploaded by

jiminiepabo680
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Reverse mortgage in Poland

Reverse mortgages have emerged as a financial instrument that allows mostly senior
homeowners but not only - to convert part of the equity in their homes into cash without
having to sell their properties or make monthly mortgage payments. This concept has gained
attention in Poland as the new law for reverse mortgages was introduced on December 15th
2014.

A reverse mortgage is fundamentally different from a traditional one. In a conventional


mortgage, the borrower - the property owner, makes monthly payments to the lender - the
bank. However, in a reverse mortgage, the lender makes payments to the borrower. The
homeowner receives funds based on the value of their home - in Poland that is mostly 50% to
60% of the offered cover, and repays the loan when they sell the house, move out
permanently, or pass away. This financial product is particularly beneficial for older
homeowners who have significant home equity but limited liquid assets as the pension tends
to be quite low.

In Poland, the concept of a reverse mortgage is relatively new, but it has been legally
recognized and regulated, as the law states this type of deal can be conducted only between
the bank and a natural person who is the property owner. The Polish government has
introduced a new law that creates an opportunity to boost the financial situation of a property
owner and states that there is no minimal age. However, the offer of a reverse mortgage is
mostly directed to the elderly around the age of 60 and older.

The mechanics of a reverse mortgage in Poland involve several key steps. First, the
homeowner must be a natural person with ownership based on the law of perpetual usufruct or
cooperative ownership title to the premises. Corporate entities and people with cooperative
tenant's title to the premises cannot proceed with reverse mortgage. The amount a homeowner
can borrow depends on several factors, including the value of the home, the age of the
borrower, and current interest rates.

Once approved, the homeowner can choose to receive the loan proceeds as a lump sum, a line
of credit, monthly payments, or a combination of these options. The borrower retains the title
to the home and is responsible for maintaining the property and paying property taxes and
insurance.

Repayment of the loan is typically deferred until the homeowner sells the house, moves out
permanently, or passes away, if the borrower dies, the heirs have the option to repay the loan
and keep the house or sell the property to pay off the loan. If the sale proceeds exceed the loan
balance, the excess amount goes to the heirs.

Reverse mortgages offer several benefits, particularly for Poland’s ageing population. They
provide a way for seniors to access their home equity without the need to move, thereby
supplementing their retirement income. This can be particularly valuable in Poland, where
pension benefits may not be sufficient to cover living expenses for many retirees.

However, reverse mortgages also come with challenges and risks. One of the primary
concerns is that the loan balance increases over time, which could potentially consume all the
equity in the home, leaving less for the borrower’s heirs. Additionally, homeowners must
continue to meet their obligations, such as maintaining the property in non-deteriorated
condition and paying property taxes and insurance, to avoid foreclosure.

References:
https://pogorzelski.pl/odwrocona-hipoteka-szanse-i-zagrozenia/
https://www.housingwire.com/articles/poland-paves-the-way-for-reverse-mortgages-with-
new-law/
https://codozasady.pl/en/p/what-is-a-reverse-mortgage-and-whom-does-it-benefit
https://www.allianz.pl/pl_PL/poradniki/dom-i-mieszkanie/odwrocona-hipoteka.html
https://isap.sejm.gov.pl/isap.nsf/download.xsp/WDU20140001585/U/D20141585Lj.pdf

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