Real estate retirement

Why is liquid home worthwhile?

Property annuitization offers a variety of benefits for older homeowners looking to improve their financial situation in retirement. By selling part or all of their property, they can receive a regular pension, a one-off payment or a combination of both, helping them to maintain their standard of living. A major advantage is that they can continue to live in their familiar home despite the sale, as models such as the partial sale or the sale with lifelong right of residence guarantee the right to live there.

Another advantage is the possibility of passing on the home to heirs despite the sale, which enables the assets to be passed on to the next generation. Security mechanisms in the contracts and land register entries protect homeowners from risks such as the insolvency of the buyer, thus protecting them from losing their home and pension.

Even if the property is not yet fully paid off, models such as the reverse mortgage offer the flexibility to release additional funds. The funds released can also be used to support the family financially, carry out necessary barrier-free home modifications or cover care costs that are often not fully covered by care insurance. Overall, property retirement offers comprehensive financial security.

An overview of real estate annuitization options

Property annuitization offers a way of extracting capital from a home without owners having to give up their familiar home. This distinguishes it from selling the property outright or taking out a loan. There are various flexible models:

1. partial sale: the owner sells part of the property but retains a share and can continue to decide how the property is used.

2. sale with usufruct: the property is sold, but the seller retains a lifelong right to live in or use the property.

3. life annuity: The owner sells the property and receives a monthly annuity for life in return.

4. reverse mortgage: owners take out a loan based on the value of the property and can continue to live in their property.

Each of these models has specific advantages and conditions, particularly in relation to the right to live in the property and the associated costs. Some options, such as the life annuity, are often only available to people over a certain age. It is therefore important to compare all models carefully in order to make the best choice for your own needs and circumstances.

A comparison of the models

1. partial sale of the property

In a partial sale, the owner sells a share of their property to a buyer, usually a specialized company. The owner continues to live in the property and pays a monthly usage fee for the sold share.

Advantages:

• Immediate liquidity: The sale of a share provides quick access to capital.

• Remain in your own home: Owners can continue to live in their familiar surroundings.

• Flexibility: It is possible to sell the remaining share at a later date.

Disadvantages:

• Monthly usage fee: there is a fee for the sold share.

• Loss of control: Shares sold with the property mean shared ownership and possibly limited freedom of choice.

Engel & Völkers now also offers the partial sale of your property. With Engel & Völkers LiquidHome, we want to position ourselves as a holistic solution for real estate owners. Use this opportunity to improve your liquidity and still stay in your beloved home. Find out more

2. life annuity

With a life annuity, the owner sells their property and receives a monthly annuity in return. The buyer takes ownership, while the seller retains a lifelong right of residence.

Advantages:

• Lifelong annuity payments: Regular payments secure income in old age.

• Right of residence: Owners can remain in their property for life.

Disadvantages:

• Final sale: The property can no longer be bought back.

• Dependence on life expectancy: The amount of the pension is often linked to statistical life expectancy.

3. sale with usufruct

In a sale with usufruct, the property is sold while the seller retains a lifelong right to live in or use the property. This allows the owners to continue living in their familiar surroundings while enjoying the financial benefits of the sale.

Advantages:

• Lifetime right to live or use: owners can continue to live in or use their property.

• Financial benefits: Sale proceeds can be used immediately without giving up the right to live in the property.

Disadvantages:

• Restricted use: the right of residence may entail certain restrictions on the use of the property.

• Final change of ownership: The property belongs permanently to the buyer, which leads to a loss of ownership rights.

4. reverse mortgage

The reverse mortgage, also known as a reverse mortgage, allows the owner to take out a loan based on the value of the property without having to make monthly repayments. The loan is repaid when the property is sold or the owner dies.

Advantages:

• No sale necessary: Owners keep the property.

• No monthly repayments: Repayment is only made on sale or death.

Disadvantages:

• High interest charge: interest and fees increase the loan over time.

• Reduced estate: The loan is paid out of the proceeds from the sale of the property, which reduces the estate.

Conclusion: Which model suits you?

Choosing the right annuity model depends on your individual needs and circumstances. Do you want immediate, high liquidity or do you prefer a monthly annuity? Is it important to you to retain ownership of the property or are you prepared to give it up?

At Engel & Völkers, we will support you with our expertise and help you make the best decision for you. Arrange a consultation today and find out more about the various options for property retirement.