How a Reverse Mortgage Works
The bank pays you a lump sum or monthly annuity against your property lien. You continue living at home.
Requirements: age 55-60+, full ownership registered in Tabu, no existing liens, residential property. Children must sign acknowledgment.
- Minimum age: 55-60 depending on provider
- Full ownership registered in Tabu required
- LTV from 15% at 60 to 50%-60% at 90+
- Lump sum or monthly annuity options
- Children sign acknowledgment declaration
Interest Rate Tracks and Lender Differences
Two main tracks: balloon (no payments, compound interest) and interest-only.
Banks offer Prime-based variable rates; insurance companies offer fixed CPI-linked rates.
- Banks: Prime + 2.6% to 3%
- Insurance: 4.5%-5.5% CPI-linked
- Balloon: compound interest grows debt
- Interest-only: principal stays stable
- Rates 1%-1.5% higher than standard mortgages
Key Risks to Understand
Compound interest: 500,000 NIS at 5% becomes 1.33M after 20 years.
Inheritance impact, family conflicts, property value decline risk.
- Debt can multiply 2.65x in 20 years
- Inheritance erosion
- Family conflicts possible
- Property value decline risk
- May affect income-tested benefits
Alternatives to Reverse Mortgage
Self-inheritance model: sell property as occupied for higher payout without compound interest.
Downsizing, room rental, standard loan, or claiming National Insurance benefits.
- Self-inheritance: sell as occupied
- Downsizing to smaller property
- Room rental for income
- Standard loan if income exists
- Claim National Insurance benefits