Funding care from your home, including reverse mortgages (hipoteca inversa)

Terms used

• IBI — The IBI is the yearly local property tax that the owner of a home pays to the town hall.
• Plusvalía — The plusvalía is the local tax on the rise in value of urban land when a property is sold or inherited.
• Hipoteca inversa — The hipoteca inversa is a loan secured on your home that you repay only after your death, with interest added meanwhile.
• FEIN — The FEIN is the standardised information sheet a lender must give you before you sign a mortgage.
• IRPF — The IRPF is Spain's personal income tax.
• AJD — The AJD is stamp duty charged on signing certain notarial deeds, such as mortgages.
• Nuda propiedad — The nuda propiedad is ownership of a home without the right to live in it until the usufruct ends.
• Usufruct — The usufruct is the right to live in or use a property, here kept by the seller for life or a set term.

Key rules

• Who can get one: A reverse mortgage is open to homeowners aged 65 or over, or with a dependency grade II or III, or a disability of 33% or more.
• Notary advice: A reverse mortgage requires a notary's advice session before signing, and the lender must give you the FEIN first.
• Debt limit: In the usual case a reverse-mortgage lender can claim only against the home, not your heirs' other assets.
• Bare-ownership sale: When you die, your heirs get no share of the home and must leave it.
• Thinner protection: Bare-ownership and care-for-property deals have no bank-style safeguards, so get independent advice and a valuation.

The short version

All three options let you stay in your home and get money or care from it. All three affect what your heirs inherit. A reverse mortgage keeps the home in your family's reach. A bare-ownership sale and a care-for-property deal usually do not.

Reverse mortgage (hipoteca inversa)

A hipoteca inversa is a loan secured on your home. You get money and normally keep living there. You can take it as instalments, a lump sum or a credit line. Interest is added to the debt each year. Nothing is claimed until you die, or, if you agreed it jointly, until the last beneficiary dies.

Your home is valued by an approved appraiser first. Lenders must be authorised and supervised by the Banco de España. Few banks offer these products today, and terms vary, so compare offers.

Protections. Before you sign, the lender must give you the FEIN, a risk warning and enough time to read them. You then attend a notary's advice session, where the notary checks that you understand the product. In the usual case the lender can claim only against the home, not your other assets or your heirs'. Ask for this in writing.

Tax. The money you receive is loan money, not income, so you pay no IRPF on it. The lender pays stamp duty (AJD). Notary and registry costs usually fall on the lender too, but check your contract.

Selling the bare ownership (nuda propiedad)

You sell the property but keep the usufruct, the right to live in it, for life or a set term. The buyer pays a lump sum, lower than the full market value because they must wait to use the home. They may also pay a monthly amount. The sale is signed before a notary and registered in the Property Registry.

Running costs. By default you pay ordinary repairs, running costs, IBI and ordinary community fees. The buyer pays major structural works. The contract can change this, so read that clause closely.

Taxes for you as seller. You may owe plusvalía municipal and IRPF on the gain. If you are 65 or over and it is your habitual home, the gain is exempt from IRPF with no limit on the amount. You normally need to have lived there at least 3 years. The buyer pays ITP (or VAT if buying from a developer) plus notary and registry fees.

Protections. This is not a bank product, so the reverse-mortgage safeguards do not apply. You rely on the notary, the Property Registry check and general consumer law if the buyer is a business. Nobody checks that the price is fair, so get an independent valuation and independent legal advice.

Lifetime income or care in exchange for property

In a renta vitalicia you hand over capital or property in exchange for a lifetime income. In a contrato de alimentos you hand over property, such as your home, in exchange for housing, food, care and medical help for life. Both need a public deed before a notary. If the carer fails to deliver, you can seek remedies, including ending the contract.

Tax works like a sale or gift. The over-65 exemption may apply to your habitual home in some cases. The buyer pays ITP or a similar tax. The main risks are non-performance, the carer dying or becoming incapacitated, an undervalued price and disputes with other heirs. Ask the notary what happens in each case. Some regions with their own civil law may differ.

What your heirs get

• Reverse mortgage. The debt (the sum lent plus interest) falls due. Your heirs can repay it and keep the home, or let the lender sell it. Any surplus goes to them. If the debt is larger than the home's value, the lender can usually claim only against the home. Heirs normally have around 12 months to repay without penalty, depending on the contract. The home counts in the inheritance for succession tax, which varies by region, and the debt reduces its taxable value.
• Bare-ownership sale. When the usufruct ends, full ownership passes to the buyer with no further payment. Your heirs have no share in the home and must move out. They keep your other assets.

Which to choose

Use the decision, checklist, documents and timeline below to compare options. Whichever you pick, take advice from a notary and an independent tax adviser before signing.

Choosing between options

Should you release money from your home with a reverse mortgage or by selling its bare ownership?

• Reverse mortgage: You meet the access rules and want to stay owner of the home. The money you receive is a loan, not taxable income, and your heirs can repay the debt and keep the home.

• Sale of bare ownership (nuda propiedad): You want an upfront price now and are happy to give up ownership while keeping the right to live there. Your heirs get no share of the home, and the buyer takes full ownership when you die.

If you want your heirs to be able to keep the home by repaying the debt, choose the reverse mortgage. If you want money now and accept that the home passes to the buyer at your death, the bare-ownership sale fits.

Timeline and deadlines

• Reverse mortgage: the debt, principal plus interest, becomes due: when the borrower dies, or the last beneficiary if agreed jointly

• Heirs repay the debt and keep the home, or let the lender sell it and receive any surplus: generally around 12 months after the death, depending on the contract

• Bare-ownership sale: the usufruct ends and full ownership passes to the bare owner, and the heirs must vacate the home: when the usufructuary dies

Documents you need

• The valuation of your home by an approved appraiser, which the lender needs to secure a reverse mortgage on it.

• The FEIN, the standardised information sheet that the lender must give you before you sign a reverse mortgage, with the risk warning.

• The notarial deed of the reverse mortgage, signed after the notary has advised you and checked that you understand the product.

• The notarial deed of sale of bare ownership (nuda propiedad), registered in the Property Registry, showing who pays the IBI, community fees and repairs.

• The public deed, signed before a notary, of a renta vitalicia or a contrato de alimentos (care in exchange for property), setting out the lifetime income or the care owed.

Checklist

• Ask the lender whether the reverse mortgage is paid as instalments, a lump sum or a credit line, and pick the one that matches your care costs.

• Ask for the FEIN information sheet and read it, with the risk warning, before you sign anything.

• Go to the notary's advice session and ask them to explain the risks of the product.

• Ask the lender to confirm in writing that the debt can only be claimed against the home, and how long your heirs have to repay.

• Check the bare-ownership contract to see who pays IBI, community fees and repairs, because the contract can change the usual split.

• Confirm you have lived in the home as your habitual home, normally at least 3 years, before relying on the over-65 tax exemption.

• Ask a tax adviser how plusvalía municipal and your region's transfer tax apply to your sale.

• Ask the notary what happens in a renta vitalicia or contrato de alimentos if the carer dies, becomes incapacitated or stops complying.

• Get independent legal or financial advice before you sign any of these deals.

Traps to avoid when releasing equity from your home

• Bare-ownership buyers get thinner protection: A sale of bare ownership (nuda propiedad) to a private person or a specialist firm is not a bank product, so the special bank-loan protections do not apply. You rely on general consumer law if the buyer is a business, the notary's advice in the deed and the Property Registry check. Get independent legal or financial advice before you sign, and ask the notary to explain every clause.

• Undervalued price: A low price for your home is a real risk in bare-ownership sales and in care-for-property deals. Once you sign, you give up the home for good, and the price is fixed. Get an independent valuation and compare more than one offer before you agree a price.

• Reverse mortgage: skipping the safeguards: A reverse mortgage must come with a standard information sheet (the FEIN), a risk warning, time to review it and a meeting with a notary who checks you understand the product. Rushing past these steps can leave you with a debt that grows each year. Take the full review time, read the sheet at home and ask the notary about anything unclear.

• Care-for-property deals can fail: In a contract of care in exchange for property (contrato de alimentos) or a life annuity (renta vitalicia), the carer may not do what they promised, or may die or become unable to care for you. You can ask to end the contract if they fail, but you will have already handed over the property. Have the contract made in a public deed before a notary, spell out the care you need, and ask what happens if the carer can no longer do it.

• What your heirs receive: When you die with a reverse mortgage, the debt (the loan plus interest) falls due. Your heirs can repay it and keep the home, or let the lender sell it. Any surplus goes to them, and normally the lender can claim only against the home, not their other assets. They usually have about 12 months to repay without penalty, depending on the contract. With a bare-ownership sale, your heirs get no share in the home, receive nothing further and must leave it. Tell your family what you plan, and check the contract for the repayment period before signing.

• Surprise tax bills: The transfer of your home is treated as a sale or gift for income tax (IRPF), and the buyer pays transfer tax. An exemption for people aged 65 or over may apply to a habitual home in some cases. Ask a tax adviser to work out the tax before you sign.

Frequently asked questions

Do I pay income tax on money I receive from a reverse mortgage?

No, the money you receive from a reverse mortgage is treated as a loan, not income, so it is not subject to IRPF (Spanish income tax). The stamp duty on the mortgage deed is paid by the lender. Notary and registry costs are in practice also borne by the lender, or partly covered by it, depending on your contract.

Who pays IBI and community fees if I sell my bare ownership?

If you keep the usufruct, you normally pay the IBI (property tax) and the ordinary community fees, plus ordinary repairs and running costs. The buyer pays extraordinary repairs and major structural works. The contract can change this split, so read that clause before signing.

Can I avoid tax on the gain when I sell bare ownership of my home?

Yes, if you are 65 or over and the home is your habitual home, you are exempt from IRPF on the gain, with no limit on the amount. You normally need to have lived there at least 3 years. You may still owe plusvalía municipal, a local tax on the rise in land value.

How long do my heirs have to repay a reverse mortgage?

Heirs generally have around 12 months to repay without penalty, depending on the contract. If the debt is lower than the home's value, they get the surplus after a sale. Check the exact period in your contract before you sign.