Santander and Mapfre have formed a joint venture to create reverse mortgages. A financial product that was born because “It makes a lot of sense.” At the moment. The reverse mortgage will be launched on the market on November 20 in Madrid in a pilot phase. The product offers monthly income to people over 65 who own a home worth more than €200,000. The interest on this product that will be paid when the debt is repaid is 5.99% fixed rate..

A reverse mortgage is a product that has had poor reviews in the past regarding how it was marketed. For this reason, Santander and Mapfre want to launch this product gradually. They will begin first in the capital Madrid, and in 2024 will expand to the rest of the Community, then to Catalonia and then to all provinces of Spain. Mapfre has eight people on staff with no exclusive commitments, while Santander has four people dedicated exclusively to the product. Marketing will begin in 101 Santander offices and 127 Mapfre offices.

At this time, since this is a pilot test, there are no commercial targets or operational forecasts. However, the enterprises assure that there is interest in the product among people from 75 to 80 years old. and they even admit that there is greater interest on the part of the heirs than on the part of the owners. It must be remembered that the debt belongs entirely to the owner of the house, but the debt is paid by the heir with interest.

That is, the person who takes out the reverse mortgage is the owner of the property. After your death, your heir or heirs must pay off the debt to the bank by putting the house up for sale or buying it themselves. The debt, as the companies note, will not exceed 70% of the cost of the home, even if the mortgage is 100%. The heir may refuse the inheritance and the joint venture will have to foreclose, but always after the death of the owner.

Here, The joint venture notes that this is not a universal product and is not for everyone. Income is provided based on life expectancy, so there is a particular incidence among clients aged around 75 or 80, although it can be accessed from 65, but will then have a lower income because the younger the age. a smaller amount of money so that the cost of the house can be spread over that time.

The home subject to a reverse mortgage must be owned, free of mortgage encumbrances, and the owner must be the only occupant. Likewise, the direct heirs (children) must be informed about the process, otherwise the product may be refused. But once they are told, their refusal is not worth it. Houses must be located in areas with high liquidity and limited volatility, and have an estimated price of at least 200,000 euros.

The opportunity to earn income has two options: with and without annuity. In the first case, the monthly payment of contributions is guaranteed until death due to the fact that the Mapfre Vida annuity product is concluded along with the mortgage.

In the second option, without a lifetime annuity, the client receives income from the reverse mortgage only for up to their life expectancy. That is, if the client lives beyond the estimated life expectancy, he will stop receiving monthly payments. This reduces the debt on property, but has the risk of causing liquidity problems for the client if he exceeds his age.

The mortgage has a fixed interest rate of 5.99%. There is no opening fee and the cost will be less than 600 euros. These costs are split between the home appraisal and the need to obtain independent advice.

An 80-year-old client with a life expectancy of 94 years and owning a house worth €450,000 would receive a monthly income of €980. The debt that would be incurred if you died at the end of your life expectancy, including interest, This will be 50% of the value of the home without an annuity and 70% if it is under contract. Life expectancy at the time of purchase of the product is not determined by a medical examination, but by general indicators and research.

The contract for the product will need to be negotiated with independent advice, which is recommended to include direct heirs. In the event of the death of the mortgagee The heirs will be given a period of nine months during which they will not pay interest to decide what to do with the mortgage load. The heirs will never repay this debt with their personal property, that is, they will be able to pay off the cost of the house.