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Posted by portugalpress on February 27, 2017

In need of extra money for your retirement? Now you can sell part of your property to the bank, get credit, and carry on living in your own home

The BNI Europa Bank launched a new equity release product targeted at seniors on February 22, at the Sheraton Lisboa Hotel & Spa.

Promoted under the umbrella brand Cereja (which means ‘cherry’), the bank’s product, a home reversion loan scheme, will be available in some urban areas of the Algarve, namely Quinta do Lago, sometime this year, following its launch in Lisbon and Porto.

BNI Europa’s home reversion loan allows you to sell a part of your house to the bank in return for a cash lump sum, a regular income, or both. Clients are allowed to carry on living in their homes as the property ownership is never passed over to the bank, with the huge benefit of getting rid of monthly loan payments, since the loan can be fully paid at the end of their contract.

This is an equity release product which the bank hopes will attract many retired clients in the sunny Algarve.

Quoting American economist and Nobel laureate in Economics, Robert Merton, BNI’s CEO Pedro Pinto Coelho said that “home reversion is the key to saving money when you are retired” by allowing clients to make more money from the assets they already own.

His presentation was followed by talks from Telmo Vieira, a partner at PremiValor Consulting; Jorge Delgado, director of the mortgage credit unit at BNI Europa; and Paul Turner, board director of Just Retirement, in the UK.

Explaining the reasons behind Portugal’s ageing population, Telmo Vieira presented a few figures: for example, it is estimated that the Portuguese population will be down to 7.3 million people by 2099 (instead of its current 10.3 million), provided that the national birth-rate will continue its downward spiral.

According to the experts, Portugal’s ageing population is causing a plethora of issues, from a pressured Social Security and the decrease of working population and pensions to soaring health care expenses.

Aiming to develop products targeted at specific market segments, the BNI Europa bank saw Portugal as an opportunity to introduce its home reversion scheme, as the southern European country is a nation of homeowners. In fact, whilst the average value of financial assets owned by the Portuguese is of €4,300 (the European average is €11,400), 71.5% of the Portuguese own a property.

What the bank is suggesting is that pensioners use their properties as a guarantee to get extra cash or simply fund their retirement, whilst providing them with unique loan conditions. With a home reversion loan, clients can pay at the end of their contract and they don’t need to take a life insurance. At the same time, this loan does not have a payment threshold and can be renovated consecutive times.

However, not all homeowners over the age of 65 can apply to the home reversion scheme. There are three main requirements: the property must be a permanent home (not a holiday property, for example), it must be free of covenants or encumbrances, and it has to be located in an urban area.

The bank’s percentage on the property will vary depending on the age of the loanee (the older the client, the bigger the percentage, up to a maximum of 65% of the property value) and his choice of credit: a larger percentage will be required if the money is made available as a lump sum.

According to Jorge Delgado, director of the mortgage credit unit at BNI Europa, the application process is “simple and quick”, taking between two to three weeks to complete. In case of death, the loanee’s inheritors can opt between keeping the property or use it to pay the debt.

Available at a fixed interest rate of 6.75%, the home reversion scheme is a pricier loan due to its inherent risks.

Speaking of the Algarve market, Delgado said he hoped this would be a sought-after product by retired clients, mainly foreign citizens who are already familiar with this kind of scheme in their home countries.

The home reversion loan was first created in the United States in 1961, and its market worth is now estimated at 1.5 trillion dollars.

By ANA TAVARES

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