A large proportion of Finns are homeowners. : According to Statistics Finland , about 70 per cent of all Finns have housing wealth, and the value of housing wealth for aged people 55-64 is over EUR 180,000 per household. According to statistics published in 2019, about one third of housing estates have mortgage debt. In 2018, housing corporations had an average debt of EUR 100,030,.
Is a Reverse Mortgage a Viable Loan Option?
Even if there is wealth, there may not always be enough working capital, especially for retired people. Money is not always enough to cover unexpected or larger expenses after a small pension, such as medical and hospital expenses or possible renovations.
If the apartment is the only asset but you do not want to sell it, how do you finance the higher costs?
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What is a Reverse Mortgage?
A reverse mortgage loan is a loan from a bank against your apartment. In practice, you pledge part of your apartment to the bank. During the loan period, no repayments are made but only interest is paid. Interest is not necessarily paid off immediately but is capitalized on the loan amount. Reverse Mortgage, Home Flex or Home Loan. Thus, in practice, the loan is a consumer credit or other larger loan secured by mortgages.
In Finland, reverse mortgages have not been on the market for a long time, but recently banks in Finland have also begun to offer reverse mortgages. The main target group has been pensioners owning housing stock in the Helsinki Metropolitan Area. Hypo launched a reverse home loan for the first time in the Finnish market in the early 2000s. Today, in addition to Hypo, reverse mortgages are offered by Goodbank Bank and the Good Finance Bank, among others.
Usually, about 50-75% of the value of a home is available for a loan, depending on the bank and the terms of the loan. The typical loan period is about 10 years, after which the situation will be reassessed.
A reverse mortgage can make it easier
A reverse mortgage can make it easier for many who have a small pension to copy with all the bigger expenses. The loan can be used in addition to medical and hospital expenses or possible pipeline repairs, even for travel or for the purchase of a holiday share abroad. For a homeowner, a reverse mortgage can therefore be a sensible solution if most of the property is stuck in the apartment and there are no wishes to sell the home.
The loan is usually repaid with the proceeds of the sale of the apartment when the borrower moves away, for example, to a retirement home or alternatively at the latest at the time of inheritance.