Advantages and disadvantages of real estate pensions – Turn your house into money and stay in it

Anyone who is old in their ownproperty lives, can generally consider themselves lucky. In many cases, your own house also becomes a burden. Depending on the condition, maintenance and renovation costs are incurred, pensions are reduced and belts are tightened. If your own financial assets are not adequately secured, this can lead to bottlenecks and compromises in quality of life have to be accepted. Or long-cherished wishes such as a trip around the world are pushed further and further back until they become unrealistic. In many cases, a real estate pension can be the solution. The preferred models for a real estate pension are the partial sale and the sale with the right of use. Which are they?Advantages and disadvantages of real estate pensions, as well as what types of real estate pensions there are, we explain in the article.

Advantages and disadvantages of real estate pension: What exactly does real estate pension mean?

Real estate pension modelsare of interest to homeowners aged around 65 and over. A real estate pension gives seniors and pensioners the opportunity to monetize their condominium or house during their lifetime without losing the right to live and use it. The equivalent value is converted into a lifelong pension or a lump sum payment.

Different forms of real estate pension

The basis of most real estate pension models is the so-called reverse mortgage. In contrast to conventional mortgages, the debt burden increases with the duration of the contract. After death, the property becomes fully owned by the creditor.
It is important to ensure that all agreements are first registered in the land registry so that no irritation can arise over the years. The property pension is offered by the providers in different models:

The real estate partial sale

A popular option is partial sales. Only as much of the property is sold as the affected pensioners are likely to need for their retirement, in a maximum case up to 50%. The seller receives a one-time payment. In return, a monthly fee is due to the buyer.
The seller continues to determine the use and design of the property. This model has two advantages. In this way, the seller continues to participate in the booming real estate market. In addition, the buyer usually comes from the real estate industry. If the house is to be sold, he will support the sellers or their heirs in achieving a good price.

The life annuity

This changes when it comes to annuitiesPropertythe owner immediately. Instead of the sales price, the seller receives lifelong right of residence and monthly pension payments until the end of life.
All obligations and costs are transferred to the buyer. This also includes possible expenses for maintenance and renovation.

The time pension

The monthly payments to supplement your pension are limited in time. After expiration, the seller pays rent to the buyer if this can be agreed.
A time annuity also means that the buyer can freely dispose of the property after the contract expires. In the worst case scenario, the seller has to move out if the buyer wants to use the house themselves.

The sale with right of use

In this case the house will be sold in the normal way. Payment is usually made in a one-off amount. The seller is allowed to remain in the property until his or her death and is responsible for the costs of maintenance during this time.

The sale with subsequent rental agreement

The seller receives the purchase price and a subsequent rental agreement for the same property. The original owners remain in their old location, but no longer call the property their own.

Real estate pensions can be a charming solution for seniors. Those affected remain in their usual environment. The lifelong right of residence is guaranteed with the entry at the land registry office. The statutory pension will be increased. Everyday life can be financed more conveniently and long-cherished wishes can be realized.
However, the different models also have a disadvantage. Since the buyer does not know when the property will become available and will only be able to use it at a later date, he sees his return reduced. This means that the sales price is usually a lot lower than the market value of the property. This makes the real estate pension less interesting for pensioners with heirs, but it can remain an option depending on the situation. Before taking out a real estate pension, we recommend comprehensive advice that examines the advantages and disadvantages of each individual case.