- 1 Mortgage annuity loan: how does it work?
- 2 Mortgage annuity and property value
- 3 When to return the loan?
- 4 Mortgage annuity loan and early termination
- 5 Concessions
- 6 Advantages and disadvantages
- 7 Mortgage and surrogate life annuity: what is there to know?
- 8 What are the costs and expenses?
- 9 Mortgage and Protested Life Loan: Is It Possible?
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Born in the United Kingdom in the 1960s, the mortgage life loan has gained a strong response especially in recent decades. This is a form of financing aimed at those who have turned 60 and has a property owned . These few requirements are sufficient to obtain liquidity as the house is mortgaged in exchange for a loan. The loan applicant does not lose ownership of the apartment but its value will be turned into cash. In addition, the reimbursement will not take place in monthly installments as it happens for other types of personal loans. To learn more, you just have to dedicate yourself to reading our guide .
Mortgage annuity loan: how does it work?
The mortgage loan was introduced by Law No. 44 of 2015. Operational for a few years, this loan allows you to access the credit more easily. The house is put under guarantee and in return you can get some liquidity . The applicant is a person who has already turned off 60 candles and has a house of his own: he can ask for a sum of money and at the same time light a mortgage on the property. It is not necessary to sell a house or other valuable assets; the ownership of the house remains with the recipient of the loan. On his death, it will be up to the heirs to decide whether to redeem the apartment or have it sold to the credit institution so that it can pay off the debt with the proceeds.
The first step will therefore be to contact a bank or a finance company. The consultants will check the documents relating to the ownership of the apartment and an inspection to calculate the value of the property. In case of positive feedback a financing contract will be signed. The guarantee will be the registration of the mortgage on the house. The amount disbursed by the bank will correspond to a portion of the market value of the home. A reimbursement plan will be agreed upon to match the needs of the loan applicant.
The sum of money payable is calculated following the appraisal of the apartment. This operation will be carried out by an independent appraiser from the credit institution to which the 60 year old has turned to obtain a loan. Once the market value of the house has been established, the maximum amount of the loan can be decided. The sum changes according to the age of the applicant : the lower the age, the lower the sum of maximum money to be paid.
Imagine that you are around the age of 60: the maximum quota is established around 15 percent of the value of the house. On the other hand, if we are around 90 years of age, the maximum sum that is due to the applicant is around 50 percent of the value of the property. So you do not lose ownership of the house but you turn on a mortgage that can be redeemed after the death of the loan applicant.
Once the bank has been decided that is suitable for financing and above all for our needs, the time necessary for the payment of the sum will not be biblical. It is about 2, 3 weeks. Sometimes it can also take a few months. The timing changes depending on whether or not you find the documents of the house, according to the expertise and the credit institution and the notary. In short, there are several factors that can influence the duration of a practice.
Mortgage annuity and property value
The sum disbursed by the credit institution is certainly linked to the age of the person requesting the loan. Then it will be up to each bank to decide independently of the others which percentages it intends to apply . Often the fee is already established and indicated in the information sheets in the bank. Of course these indications are not binding and do not indicate an obligation. Some banks may also report to each individual client requesting what kind of percentage is applied to this form of loan. The presence of other tenants in the house, which must be mortgaged, can certainly affect. The factor in fact also varies according to the age of the other inhabitants of the apartment. Therefore, we can not talk about a fixed percentage of the value of a building. This is an element that must be analyzed well at the time of applying for a life-long mortgage loan.
When to return the loan?
The mortgage loan is called this way because it has a duration that corresponds to the life of the borrower. In fact, funding begins when the contract is signed and ends on the applicant’s death . Prior to the death of the beneficiary of the sum, the credit institution is not required to demand repayment of the amount that has been paid off. Obviously, the interests and expenses must not be considered.
Let’s see what happens at the death of the beneficiary of the financing. There are three possible ways that the heirs can undertake:
- The loan can be repaid through the redemption of the property. This type of option must be chosen within one year after the death of the beneficiary of the loan.
- The heirs can sell the house in cooperation with the bank . The money obtained from the sale will serve to repay the loan granted to the dead beneficiary. What remains, once the debt has been extinguished, will be distributed among the heirs. It is clear that the value of the debt can never exceed that of the sale. If the heirs choose this second option, they will have to proceed with the purchase and sale of the apartment within 12 months of the transfer.
- The property is left to the credit institution. With this third option, the lender can decide to sell the house and settle the debt.
What happens if a year passes by the succession and the debt to the bank has not yet been paid? The credit institution can proceed with the sale of the apartment. A new appraisal will be carried out, again by a technician not linked to the bank. Once the property or any other valuable asset is sold, the bank retains the amount of money that will serve to honor the credit granted to the surviving beneficiary. In case of surplus, it will be distributed to the heirs.
Mortgage annuity and early termination
If we talk about mortgage life annuity, we must also take into account the possible early termination of the contract . The amount granted by the bank is then returned in full. But when does this condition occur? Early termination is triggered on the death of the borrower if the heirs leave the apartment, burdened by the mortgage, to the bank to sell it. However, it can also happen when the beneficiary is still alive: he could pay the late monthly installments 7 times to trigger the termination of the contract. This condition also occurs if the property loses its value or if the transfer of ownership of the apartment that was given as collateral occurs.
If you take out a mortgage loan, you can benefit from tax benefits as required by law. What are these advantages? The beneficiary of this particular form of financing, which has become operational in Italy in recent years, will be exempted from the payment of stamp duty, register, mortgage and land registry. But not only. The mortgage loan applicant will also be exempt from government concession fees. It will only be necessary to pay an alternative tax that corresponds to 0.25 percent of the total that has been financed and paid if it is a first home. We speak instead of 2 percent if it is another property.
The advantages and disadvantages
An annuity mortgage loan, as well as any other form of financing, has advantages and disadvantages. The positive side of this loan is certainly the absence of a repayment plan in monthly installments. Furthermore, the sum that is provided by the credit institution is not subject to interest. The credit institution, taking as a reference point the technical expertise and the age of the applicant, will have to establish the amount to be paid. The sum can not be higher than 350 thousand euros.
But the disadvantages are not lacking. The downside of an annuity mortgage loan is given by taxation . When this loan is applied for, the ownership of the property remains with the applicant and is never transferred to the bank. What does it mean, are you wondering? It is up to the owner of the mortgaged house to continue to pay the property taxes relating to the ownership of the property: we are talking about Imu and Tasi. The same goes for the waste tax (Tari) and in some cases for the IRPEF.
Mortgage annuity and subrogation: what is there to know?
Usually we talk about subrogation only if we refer to a mortgage loan. At least that is what the current legislation provides. In fact, according to the provisions of Article 1202 of the Italian Civil Code, when applying for a loan, it is also necessary to indicate how the money will be used and therefore the allocation of the amount paid by the bank. The exact term is finalized loan: the purpose is explained before obtaining the requested amount. However, having a subrogation of a lifetime mortgage loan is not so complicated. Of course, in this case it should be a non-finalized loan and this could go against the provisions of the current legislation.
What are the costs and expenses?
The costs of an annuity mortgage loan are not so different when compared to a normal mortgage loan . Let’s find out together what expenses you have to face when you decide to take this path. Here is a summary list that you can consider:
- the cost of preliminary investigation and appraisal (we are talking about a few hundred euros)
- the costs of a notary deed (the cost changes depending on the appraisal value of the property and the loan granted.There may also be an amount of several thousand euro),
- the interest if we decide to want to repay the loan,
- the substitutive tax to that of stamp duty and register that corresponds to 0.25% of the quota granted in the case of banks, or to 2% if the donor institution is a different subject and for the second houses,
- a possible penalty in case of early termination (the cost, if foreseen, will be included in the contract).
The legislative decree 226/2015 must always be kept in mind according to which financial institutions can not request money for the payment of expenses incurred if the applicant decides not to underwrite the life loan (Article 2, paragraph 3). The legislative decree prohibits such conduct by financial companies.
To apply for a mortgage annuity loan there are no specific requirements other than that of age. Act 44/2015 establishes that it is not necessary to have a minimum or maximum income to be able to access this form of financing . Each bank can decide whether or not to grant a mortgage loan on its own terms. Obviously to know what are the principles of a bank, you should consult the information sheet or go directly to the branch in order to have a more accurate picture of the situation.
Mortgage and Protested Life Loan: Is It Possible?
It has happened that people registered in the databases (Crif, Ctc or Cr) because protested or bad payers have not been able to take advantage of this form of financing. The request for access to a mortgage loan was rejected for their credit history . Of course, there is no universal rule for everyone. Each bank adopts an attitude that may be more restrictive towards some categories of subjects included in the “black lists”. It is up to the credit institution, which will have to pay the amount, evaluate the loan application well and decide whether to give liquidity to those who may have failed to settle the debt with other lenders in the past. A “stain” that can often turn into a huge disadvantage, especially when there is a need for a certain amount of money to cope with unforeseen or various problems.
And if the house is owned by more than one subject? It is a very widespread case in Italy. Assuming that the mortgage annuity loan is reserved for those who have reached 60 years of age, it will be necessary to take into consideration the personal appearance of the other owners . For some banks even these subjects, owners of the house, must be at least 60 years old. If then the apartment is joint (we speak of spouses or cohabitants), even in this case it is necessary – so that there is the provision of funding – that both have turned 60. This aspect must be taken into consideration even if the apartment is owned by only one of the spouses.