What is a Reverse Mortgage

But what is a reverse mortgage?

Reversing a mortgage loan The Ministry of Finance adopted a follow-up revision of the proposed hypotheses for the Reverse Mortgage Loan Act (the earlier revision dates from 19 April 2010) on 26 April 2011. Preference will be given to the Reverse Mortgage Loan Act itself and, as stated in the Council of Ministers' legislative work timetable for 2011, work should be complete by the end of June so that the current Parliament can adopt the Act.

The action in the pipeline is expected to allow persons owning a piece of immovable property to obtain extra funding. Mortgage reverse lending is available in 10 countries of the European Union and is only dealt with at Member State level as Community legislation does not deal with these matters.

According to the proposal, the list of companies authorized to grant reverse mortgage credit will be restricted to those authorized by the law to grant credit and whose activity is subject to monitoring by the Financial Supervisory Authority (or the relevant supervisory authority of another Member State). Credit establishments may conclude a reverse mortgage credit contract with a person who owns the right of possession of immovable property, a proportion of the right of possession of immovable property, an unlimited right of beneficial use of immovable property or a right of cooperative proprietorship of immovable properties.

Before concluding a contract of sale, the bank does not evaluate the borrower's ability to incur debts, but only his solvency, i.e. his bank record. Borrowers may receive the loans in instalments for a term specified in the Arrangement or as individual payments and use the proceeds received for any purposes they deem appropriate.

The reverse mortgage is to be granted in Poland using the local exchange rate. To determine the amount of the reverse mortgage credit, the value of the mortgage is based on the fair value of the asset, which is valued by a certificated expert. Borrowers may reside in the immovable up to their own deaths, after which the credit institute will settle their claims with the amount received from the sales.

If this is the case, the right to reimbursement of a reverse mortgage becomes due and payable 12 month after the borrower's deaths. The aim of this option is to allow the inheritors to pay back the mortgage if they wish to keep ownership of the real estate. Borrowers may withdraw from the contract within 30 workingdays of its conclusion without giving reasons.

In addition, an arrangement may be cancelled by giving three months' written warning. In addition, the borrowers can reimburse the loans prematurely at any point in the life of the loans without having to debit this bank account. Due to the special feature of a reverse mortgage credit, the debtor is legally obligated to keep the real estate in good condition during the contract duration, to make prompt payment of tax and fees in connection with the real estate and to take out and keep emergency health cover.

In the event of non-compliance, the credit institutions should require the borrowers to rectify the error within the prescribed period of at least thirty-day. Non-fulfilment of the request entitles the creditor to cancel the contract. In addition, the hypotheses specify the conditions (a self-contained catalogue) under which the credit establishment may cancel a reverse mortgage credit contract.

Besides the non-fulfilment of the above mentioned commitments, these situations also comprise a circumstance in which the recipient has sold the ownership of the land covering the credit without the credit institution's approval, although he has undertaken to own or transfer to the credit institution the land to a certain degree; even if enforcement action has been brought against the land by another debtor.

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