The reverse mortgage option 

Using one’s real estate assets to increase one’s monthly pension.

 Oded Malcha (photo credit: Call Financer and Insurance)
Oded Malcha
(photo credit: Call Financer and Insurance)

Many seniors in Israel live in actual poverty, while others live under strained circumstances. According to the National Insurance Institution, 182,000 seniors live below the poverty line, approximately   23% of all seniors in Israel. There are no figures for those who live under strained circumstances, the numbers are most likely higher since people who live on a pension are receiving less than they used to. This is especially true when one of the partners in marriage has passed away. When that sadly happens the remaining partner only receives only part of the original pension.

One of the ways to alleviate the financial problem of seniors is by taking out a reverse mortgage.

Most seniors in Israel own the residence they live in. With real estate prices being so high, many seniors are asset rich and cash flow poor. Their monthly income is insufficient to cover their basic needs or the standard of living they were used to.

And that is where the reverse mortgage comes into play. 

A reverse mortgage granted by a financial institution does not Technically differ from a regular mortgage because the property is the collateral for the loan. The difference is that the client has the option if he so wishes not to make anu monthly repayment payments. Instead, the original mortgage increases yearly as the accumulated interest payments are added to the mortgage. Upon the death of the borrower or borrower, the heirs can either pay off the mortgage and keep the property or sell the property or pay off the mortgage and keep the property.

Oded Malcha is head manager of the Mortgage Department at Clal Insurance and Finance Ltd. Regarding a reverse mortgage, he had this to say, “A reverse mortgage isn't limited to those who live in strained financial conditions; it is also a financial tool used by middle-class families or individuals. It is used by parents who want to use the funds obtained from a reverse mortgage to help their children purchase their own home. It can be used to take advantage of an especially attractive business opportunity etc. Others may want to use the additional funds to do things they have always wanted to do, such as take a cruise and visit places they have always wanted to visit”. 

A reverse mortgage is indeed one of the best options for seniors available. It allows seniors to live in their homes for the rest of their lives, and the lump sum can be invested in a way that will yield a very welcome addition to the monthly pension payment. It can also be used for basic family needs, or to highly improve one’s quality of life.

There are various financial institutions that offer reverse mortgages and as of now Clal Insurance and Finance Ltd offers the best terms in the market.

The amount of the mortgage is calculated as a percentage of the value of the property and varies according to the age of the prospective client. With Clal the minimum age to be eligible for a reverse mortgage is 55. At that age, the value of the reverse mortgage will equal 20% of the value of the property; at age 90, it will be equal to 60%. The property must be solely in the name of the borrower and the minimum value of the property must be at least NIS one million. In the case of a married couple, the transaction is done in both their names, and the eligibility is calculated according to the age of the younger partner.

Taking out a reverse mortgage with” Clal” has other advantages as well. It is a leading and very reputable financial institution with over 15 years of experience. Apart from that, Clal pioneered the “reverse mortgage” concept in Israel.

In financing real estate, personalized service, and adapting the available financial tools in complex situations is very important and Clal has the necessary expertise and know-how.

The proceeds of a reverse mortgage can have multiple uses.

Here are some of them.

  1. Traveling to places one always wanted to visit but could never afford to.
  2. Renovating one’s home.
  3. Helping ones your children to buy a home of their own. 
  4. Paying for intuition expenses for one’s offspring.
  5. Financing weddings of offspring.
  6. Paying off accumulated debts. 
  7. Buying and moving into a new home adapted to changing circumstances.
  8.  Making investments that will augment one’s monthly income.  
  9. Financing a move to a sheltered housing or a nursing establishment.