Rich in bricks, poor in income.

The riddle defines more than nine million people over 65 years of age, almost 21% of the Spanish population.

This group has saved throughout their lives, but they have gambled everything, or almost everything, on a single card: housing.

Most of them (89%) own at least one home.

85% of the savings generated throughout their lives is there, between those walls, while only 14.9% is placed in financial products that channel savings.

However, the money that comes through the door is not always enough to maintain the quality of life they had before retirement.

Without forgetting that, inexcusably, older, more care and more expenses.

“More than half of retirees cannot make ends meet.

They have the savings immobilized in their home”, says Ángel Cominges, CEO of Óptima Mayores.

The salt in the wound is inflation, 9.8% in March, which causes a loss of purchasing power that remains to be seen if it will be compensated with the revaluation of pensions.

The problem is obvious.

With the bricks they cannot pay for home care, a residence, change the bathtub for a shower, fix their teeth, cancel debts or fill the increasingly expensive shopping cart.

Not to mention things that were common until two days ago, such as taking a trip, going to the theater or going to the hairdresser once a week.

"There are millions of pensioners who need a pension supplement now and they can't have it because they haven't saved for retirement," says José Antonio Herce.

This doctor of economics expert in longevity realizes that the value of the housing stock in Spain is equivalent to 3.5 times the GDP and wonders if "such wealth could not serve the financial well-being of its owners in their vital phase after retirement ”.

The solution has existed for years: it involves converting those bricks into euros with products such as reverse mortgages, bare ownership or reverse housing.

All allow the elder to continue living in his house until his death, something that they strongly desire and that is not possible with the traditional formulas of renting or selling the property.

It is what Miguel, Enrique, Santiago and hundreds of other people wanted, whose story will be told along these lines.

They are the exception, since these formulas that monetize housing have never been very successful in Spain.

Among other reasons because there is ignorance and "a brutal distrust towards products in which housing mediates", says Pedro Serrano, professor of Financial Economics at the Carlos III University and author together with Juan Ángel Lafuente, professor of Finance and Accounting at the University Jaume I, from the book

Also because in Spain leaving the flat as an inheritance has always been a sacred gesture.

Although Herce launches a warning: “People who are now 55 or 70 years old are going to have to use their homes to generate liquidity;

The sooner it is said loud and clear, the better.”

And it seems that he penetrates among some of those mentioned: "60% of those who call us are the children, despite the fact that they will inherit less," says Cominges.

credit in reverse

The list of solutions starts with the reverse mortgage, "the only monetization formula that allows you to maintain ownership of the house, continue living in it or rent it and leave the assets to your children", summarizes Nuria López Catalán, director of Reverse Mortgage of Caser.

This financial product, designed so that those over 65 years of age or dependents can obtain a supplement to their income, was no longer sold in Spain after the bursting of the real estate bubble.

After years trying to get off the ground without much success, it is now revived.

The turning point in this rickety market was the announcement, on February 22, of the entry of Banco Santander and the insurer Mapfre.

They do so by creating a society for the commercialization of reverse mortgages.

Experts are convinced that there will be a before and after.

"The alliance dilutes the reputational risk, so there will be a cascade reaction of competitors," believes Lafuente.

Mapfre acknowledges having studied the reverse mortgage on several occasions, but “we have never found the moment”, says Begoña Magaz, director of the Technical Area for People at Mapfre Spain.

Now yes.

“Because the greater longevity means that the savings and purchasing power of the elderly are lost over time.

The fact that you live longer makes you consume them sooner”, says Magaz.

It hopes to start selling the reverse mortgage in the summer, but does not provide details on what the product will look like.

“We do not have the configuration closed, it will be adapted to each client.”

The step forward by Santander and Mapfre reinforces the idea that the sector is going to expand in the coming years.

Tour has.

In 2021, only 197 reverse mortgages were signed for an average amount of 476,107 euros, according to the Council of Notaries.

It is 77.4% more than in 2020 (111) and 337.7% more than in 2018, when there were only 45 senior mortgages.

The golden year was in 2009, with 780 contracts.

In the UK, the most mature market, 42,000 loans were made in 2021 for £4.4bn.

According to a report by the EPPARG, a European association that brings together reverse mortgage providers and advisers, and the consulting firm EY, the global market will triple in ten years.

The document, with data from 13 countries, concludes that more than 15,000 million dollars a year are now released with the different types of senior mortgage and that in 2031 they will exceed 50,000 million dollars a year.

This product "can play a much more important role in Spain, but also in Italy, France, the Netherlands and Ireland, if sufficient financing is obtained to promote the growth of the market", points out Steve Kyle, general secretary of the EPPARG, who the strong implantation of the product in the United Kingdom and Sweden stands out.

Interest there.

“More and more banks and insurers, including foreign investment funds,

they are interested in marketing reverse mortgages in Spain”, defends Ángel Cominges, who is also president of the Spanish Reverse Mortgage Council.

The EY consultancy points out along the same lines: "All the big banks have begun the analysis of what product to give to their clients, although they wait for the market to evolve."

At the moment, they are reluctant to advertise anything that has to do with these loans.

They do not openly offer reverse mortgages, only if a client expressly requests them.

Banking is cautious because two extremely sensitive issues are at stake: the elderly and the home.

Also because they carry some judicial sentences for senior mortgages signed in the past and declared null.

"They fear reputational risk," says Serrano.

If 15 years ago twenty entities operated, today the offer is very scarce.

Caser, the only insurer that sells reverse mortgages in Spain, has been doing so since 2019. A year later, it signed 48% of all operations.

Then there are a few banks that can be counted on the fingers of one hand.

One of them is the Portuguese bank BNI Europe, which markets the loan through Óptima Mayores.

Catalana Occidente has also been selling reverse mortgages since 2008, although it does so through a financial credit institution of the group, Bilbao Hipotecaria, and “its demand has not been very important to date”.

Seguros Santalucía studies "the best proposal so that our clients can make their real estate assets liquid, not only with a reverse mortgage, but with any monetization solution".

Enrique Rojo poses next to the building in which his home is located, in Majahadonda, on which he has made a reverse mortgage. Andrea Comas

Miguel García jokes about his age.

On the other end of the phone he explains that he has two: the optimist is 48 years old, the pessimist goes up to 84 years.

Despite having sufficient assets, "the banks did not give me a mortgage or a loan and I had specific needs."

Then, Miguel fell into the hands of a moneylender: 170,000 euros with 20% interest.

Things got complicated.

He knew about the existence of the reverse mortgage through some relatives and decided that it was the best solution to clean up his accounts.

He did it three years ago on his habitual residence in Madrid.

Although they valued his house at around 800,000 euros and offered him more than 300,000, he only asked for 200,000 euros at one time.

“I only see advantages.

They give me some money and I don't have to worry about paying it back”.

His seven sons seemed fine with it.

Enrique Rojo is 74 years old, married, has two children and three grandchildren and a retirement pension that he defines as “sufficient”.

Still, he signed the reverse mortgage five months ago.

This retired civil engineer had no more payment commitments than a traditional mortgage that he wanted to pay off and "I needed to improve my balance of income and expenses."

The reverse allowed it: 170,000 euros, it did not reach 30% of the value of his home.

"I had a long conversation with my son and he told me that, if my life resolved, go ahead."

Both Miguel and Enrique contracted their product through Óptima Mayores, the main intermediary in the reverse mortgage market in Spain.

This independent advisor has distributed more than 50 million euros since 2005, has advised more than 35,000 clients (to whom he must present three different offers) and has marketed 17 reverse mortgage products.

For this year, he plans to mediate 700 signatures worth 100 million euros.

And for the next five years he expects 8,000 senior mortgages and 1,000 million loans.

A new opportunity opens up (will it be the definitive one?) for this product regulated in Spain since 2007 (Law 41/2007).

The credit works the other way around than a traditional mortgage, since the debt increases over the years.

The calculation of the loan is based on two pillars: the value of the home and the life expectancy of the applicant.

The most widely sold product lends an average of 33% of the home's appraisal value, although it ranges between 25% and 45%.

The older, the more amount.

The more expensive the house, the more equity.

Thus, for a house valued at 600,000 euros, the borrower can obtain 200,000 euros at one time or as monthly rent.

To the capital we must add the interests, which are compounded —they are added to the initial capital, on which new interests are generated— and are between 5.5 and 5.95%.

This fattens the account, although the entities and insurers say they do the calculation so that the total debt (principal plus interest) does not exceed 70% of the appraised value of the home, says Professor Serrano.

This amount is claimed from the heirs one year after the death of the owner and once they have inherited the house.

“No principal or interest is payable until after death.

However, it can be canceled at any time”, says Iñigo Hernández, Director of Business Development at Óptima Mayores.

It is then that the heirs can choose to sell the property to cover the debt.

Now, like any financial product, it has its risks and here the greatest risk is called longevity.

In the event that the elderly person exceeds the life expectancy calculated for his reverse mortgage (with a term of between 10 and 15 years), he will stop receiving the income from that moment, but will continue to accumulate interest.

To avoid this situation, he would have to take out life annuity insurance with an insurer that guarantees the same level of income for life.

The second risk if you live longer than predicted or the real estate market depreciates is that the debt ends up being higher than the appraised value of the house.

In this case, the debt that overflows goes against the mass of the inheritance.

In the past, the entities marketed combined reverse mortgage products plus a deferred annuity that were the origin of the reputational crisis of the product, as the contracts contained abusive clauses or lack of consent.

In addition, the premium used to be financed with the reverse mortgage and increased the debt from the moment of contracting.

To avoid this reputational risk, Caser has designed a different product.

“Being an insurance company, we do not have to incorporate deferred annuity insurance.

Our calculations already incorporate the possible risk of longevity and loss of market value.

This makes the evolution of the debt much slower, since it only increases by the amounts disposed of with the reverse mortgage plus interest”, describes López Catalán.

He gives an example: “A married couple between 85 and 86 years old, with a house valued at 450,000 euros, receives 1,192 euros a month until the youngest turns 102.

The debt to life expectancy estimated and extended by us (98.2 years) would be 292,500 euros, adding principal plus interest.

At 102 years of the youngest would be 450,000 euros.

Ignacio Crespo's uncle is 87 years old, his aunt 91.

"They have an average pension of 1,600 euros per month and some solution had to be found that could provide them with economic relief."

They have an asset, their home, whose appraised value is around 400,000 euros.

Five months ago they signed a reverse mortgage with Caser with a term of 16 years.

They chose to receive a monthly income of 1,100 euros.

It is evident that in this market the credit is squeezed more if the value of the house is high, although it is not essential.

"I could get it with an appraised value of 150,000 euros, although the client will barely charge 50,000," says Cominges.

What is essential is that the house is in towns with more than 45,000 inhabitants.

The house is transferred

Bare ownership is another of those products that guarantee a supplement to the pension.

The difference is that here the property of the house is lost, although not its use and enjoyment.

It is a more popular formula than the reverse mortgage: there are more and more advertisements on real estate portals such as Idealista or Fotocasa.

Even so, it is still a minority market in Spain (an average of almost 2,900 operations per year since 2014).

When an elderly person sells the bare property to an investor, what he is doing is reserving the usufruct until his death.

And he can rent it in the case of moving to the children's house or to a residence.

Only when the owner dies, the investor acquires the freehold.

They are investments for 12 or 15 years, so it is reduced to a specific profile: older people aged 75 or 80 who want to continue living in their home.

In fact, seven out of ten sellers of bare property are women with an average age of 80 years.

It would be very difficult for someone 65 years old to own a bare property.

Eduardo Molet, founder of the real estate agency that bears the same name, is one of the agents that carries out the most operations of this type in Spain.

"How is it possible that a lady over 80 years old, who has a pension of 500 euros per month and a house of 180 square meters with community expenses of 200 euros, is living poorly?"

It is the question that Molet asked himself when he began to sell the naked property in Madrid back in 2017. So, "people were ashamed and now it is a normalized concept."

The solution is more used by adults without descendants, although there is everything.

“Most children want their mother or father to have quality of life in later years,” she says.

The sale of the bare property entails a discount with respect to the market price of the house.

"The older person receives between 55% and 80%," explains the agent.

The discount depends on age, life expectancy and the location of the house.

"An 80-year-old woman with a flat valued at 200,000 euros is going to receive around 140,000 euros," Molet calculates.

In this real estate operation there is no obligation to return or pay interest, although the heirs lose ownership of the house.

The most common is that the older person receives a single payment and, from then on, only has to pay the community fees.

A couple of weeks ago Carmen García, 78, single, childless and with a flat in Madrid, sold the naked property.

She has a pension of 1,300 euros a month.

She did not complain, but "if I need a denture it is more than 6,000 euros," she says.

This retired nursing assistant saw an advertisement for the bare property offered by Molet's agency on television and decided to sign.

For her apartment valued at 300,000 euros they gave him 170,000 euros.

Lucía Ugena, 69, gets emotional all the time talking about her father Santiago, who died three months ago.

“The pension was scarce, about 800 euros, and there came a time when she needed help at home.

An inmate plus the rest of the expenses add up to more than 2,000 euros.”

Lucía found out about the naked property in 2019, when her father was 94 years old, also through a television ad, and tried her luck, although without much hope.

She "she thought that the house would not work, being a third without an elevator located in a modest area of ​​Madrid", in the neighborhood of Lucero.

But the thing was fast.

In a couple of months they got a couple of investors.

"The house was valued for less than 200,000 euros and was sold before a notary with a 20% discount," says Lucía, who has two other brothers.

A year and a half later,

Santiago's physical condition and cognitive deterioration advised his transfer to a residence.

He passed away last January, three years after signing the bare property.

Lucía Ugena made the bare property for her father. Andrea Comas

reverse housing

Reverse housing is a relatively new formula in Spain.

It arrived in 2017 from the Socimi Inversa Prime (formerly Almagro Capital), which has been listed since 2019 on BME Growth and has 1,193 shareholders.

This solution consists of the socimi buying the home of the elderly person, to whom it is rented for life and for a fixed income.

The discount at which you buy is calculated based on the age and condition of the home: it ranges from 15% to 45% of the appraised value with the aim of maximizing the profitability of investors.

A part of the benefit is constant and derives from the rent withheld at source;

and another part will take place with the sale of the asset, which will happen when the tenant leaves the house, either by choice or death.

The rent is flexible and for life.

"At any time the tenant can decide not to continue paying, they give us the keys and rents stop accruing without penalty," argues Enrique Isidro, executive vice president of Inversa Prime.

And the day the tenant reaches his life expectancy “we discount the rent and he will pay exclusively for community expenses and supplies.

In other words, we are offering a closed operation from the firm”, he adds.

The socimi focuses on markets and prime homes with real estate liquidity, essential to rotate properties.

In addition to Madrid, the solution is in Asturias, Barcelona, ​​Valencia, Malaga and Seville.

From its inception and until December 31, 2021, it had 172 assets in which they have invested 73 million euros.

The goal is to reach 250 million investment in 2023. "We are growing, but on a tiny basis," says Isidro.

for dependents

Change of third.

The Pensium formula has nothing to do with the rest, since it focuses on the elderly in a situation of dependency, even if they do not have it recognized.

There are more than 1.2 million people in Spain in this situation and they can hardly bear the cost of a residence with their pension, which ranges between 2,000 and 2,500 euros per month.

"Most are widows with incomes between 700 or 800 euros," says David Igual, Director of Operations at Pensium.

"It is a very broad

and it is where the real need for money of people, older people, is focused," adds Igual, who recalls that half of those over 80 have dependency problems.

The

, which was born in 2017 and has among its partners Atresmedia, Mediaset España, Banco Sabadell, Mutualidad de la Abogacía, Mutual Médica and different

, allows the financing of care expenses.

It does so assuming the payment of the residence or home care for up to a maximum period of 10 years.

In exchange, the eldest hands over the management of the rental of his empty house to Pensium.

Normally, the rent is not enough to cover the expense, so the company advances the necessary amounts (about 1,200 euros on average per month, that is, double what it gets for renting the house).

This generates a debt with an interest of 5.7%.

When the elderly person dies or is assigned a place in a public residence, the company keeps the rent long enough to cover the advance payments and interest.

With this solution, ownership is not lost.

“We can never keep the house, the debt does not go against the person,

no heir or family member has to pay with their resources;

it is the home that activates the payments”, says Igual.

Pensium manages about 250 houses.

The only requirement is that they can be rented and the cost of the works can be included in the program.

pending accounts

The loss of income is a growing concern among Spanish pensioners.

And it's not getting any better.

Spain will be one of the oldest countries in the world in 2050. By then, 40% of the Spanish population will be 65 years of age or older.

It is the reason why the reverse mortgage has been put back on the table as a viable alternative to complement public pensions.

Now, it seems that you still have unfinished business.

One is the price.

It is an expensive product that complicates its massive contracting.

The interests, which can reach up to 6%, "are obscenely expensive, it's outrageous," says José Antonio Herce, an expert in longevity.

And he gives an example: "A reverse mortgage that offers you 10,000 euros each year capitalized at 6% for 15 years is 246,725.28 euros."

On the other hand, in the United Kingdom the interests move between 2% and 2.5% per year, adds Pedro Serrano, professor of Financial Economics at the Carlos III University.

Another matter of concern is the regulatory framework for reverse mortgages (Law 41/2007).

“The regulation is deficient, it needs one that is more advanced, that is more protective of the contract holder and the best protection is that the product is insurance and not financial”, Herce thinks.

The existing legal framework already requires guarantees to protect the consumer, such as signing before a notary or having an independent advisor who explains the operation clearly and transparently.

However, "the reverse mortgage is excluded from the real estate credit law, which allows notaries to intervene in the pre-contractual phase and, in addition, related products such as life annuity insurance are not subject to formalization before a notary", Teresa Barea details. , spokesperson for the Council of Notaries.

Some financial institutions believe that a more comprehensive law is necessary.

CaixaBank's response indicates this: "We wait until the regulatory framework is more advanced to have a specific product."

The bank launched a pilot test in 2019 in part of its offices with Vidacaixa, but right now it says it does not sell the product.

Another of the pending accounts is to get rid of the bad image of its previous stage, when products were marketed that have given rise to court rulings.

Juan Carlos Burguera, managing partner of Burguera Abogados, has had half a dozen cases of those affected by reverse mortgages signed between 2006 and 2008. The heirs find that "the debt eats up the value of the apartment because the capitalization of unpaid interest generates turn new interests”, says the lawyer, who adds: “They were truffled with abusive clauses”.

Juan Ignacio Navas Marqués, founding partner of Navas & Cusi Abogados, has handled thirty cases.

These are reverse mortgages signed years ago and whose holders are dying.

“The heirs denounce that the liquidation that they make of interests is abusive.

Besides,

some entities made them subscribe to an expensive life annuity insurance, of about 45,000 euros”.

And he adds: "The heirs find themselves with debts that range between 160,000 and 170,000 euros and ask the courts to nullify the contract and reduce the debt to the fair amount, because there are cases in which there was a disproportion of 45,000 euros" .

The Association for the Defense of Consumers and Users of Banks, Savings Banks and Insurance (Adicae) believes that it is a risk product that did not catch on due to its complexity.

The association is not opposed to this product, but it is opposed to doing it the same way it was being done, because it was not transparent and "the costs and conditions were not favorable to the heirs," says Manuel Pardos, its president.

César Díaz, lawyer for the Confederation of Consumers and Users (CECU) says that "the reverse mortgage is a complex product, whose recipient, most of the time, is a vulnerable consumer, so if you are in dire financial need We suggest that you evaluate the different financing options and have the appropriate advice”.

And, "if there are heirs, talk to them."

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