Equity release for over-65s: turn your home into income without selling

The hipoteca inversa (reverse mortgage, a form of equity release) is a financial product designed for people over 65 who own a home and want to turn part of its value into a monthly income without having to sell it or move out. The bank lends them money using the home as security, and the loan is settled when they die (through the sale of the home or repayment by the heirs).

How a reverse mortgage works

The bank has the home valued and offers a maximum loan amount (usually 25-50% of the valuation). The owner can receive it as a lump sum, as a lifetime monthly income, or as a combination of the two. There are no monthly payments to make: the loan rolls up with interest and is settled when the owner dies or when the home is sold.

How much it pays

For a €200,000 home and a 75-year-old owner, the typical income would be between €500 and €800 a month, depending on the lender and the product. The amount depends on the value of the property and on the applicant's age and statistical life expectancy.

How a reverse mortgage is taxed

The income received from a reverse mortgage isn't subject to IRPF, Spanish personal income tax (these are loan drawdowns, not income). The heirs do have the option of repaying the loan to keep the home, or letting the bank sell it to clear the debt and keeping whatever is left over.

When it makes sense

When the older owner has a home of significant value and a pension that isn't enough for their needs, wants to carry on living in their home, and their heirs understand and accept the situation. It doesn't make sense if the heirs can afford to support them or if the owner would rather sell and use the capital.

Find out what your property is worth: RadarPro provides up-to-date market value estimates that you can use as a reference before negotiating with a lender.