According to the National Institute of Statistics (INE), 89% of people over 65 in Spain own their primary residence. However, many of these individuals do not live comfortably: the average retirement pension in Spain is €1.507 per month, and the average widow's pension is €934 per month. The question is: how can we increase these incomes to finance our dreams and enjoy a more fulfilling retirement?
The real cost of living after retirement
According to INE data, the average annual expenditure in Spain for a single person over 65 is around €19.000 (approximately €1.600 per month), although in cities like Madrid or Barcelona, this figure rises to around €2.000 per month. In conclusion, a person living in these cities and relying solely on their pension income will not have a comfortable retirement, financially speaking.
Therefore, we must ask ourselves, is it fair that a person who has saved throughout their life to be able to pay for a home, and who has built up a small fortune, spends the last years of their life with financial hardship and without enjoying their well-deserved retirement?
Real case: Rosa and the reverse mortgage
Let's look at some real examples: Rosa is 85 years old and has a good pension of around €2.300, but for the past few months she has needed to hire a live-in housekeeper. This costs her about €1.450 per month. And since she lives in a nice house, she has to cover high community fees and maintenance costs. In short, she barely had €300 left for all her monthly expenses.
What solution has she taken after discussing the problem with her children? She has requested a reverse mortgageShe receives approximately €1.500 per month from this rental income, which supplements her pension. This annual income of €18.000, plus interest, will be paid by her heirs upon her death and the sale of her home. The total accumulated debt will never exceed 50% of the property's value, and although her children's inheritance will be reduced, they will have been compensated by the fact that their mother spent the last years of her life enjoying her assets in a comfortable financial position.
Real case: Mateo and the sale of the bare ownership
Another similar case: Mateo was self-employed and upon retirement received a pension of only €1.200. He owns an apartment valued at €330.000, and his children's futures are secure; they won't need their parents' inheritance. In this case, Mateo and his wife opted to sell the bare ownership of their home. They received €185.000, tax-free and without having to repay the bank, allowing them to continue living comfortably for as long as they live, with a solid financial safety net.
Tax advantages of these operations
These types of transactions have a very interesting advantage: the sale of bare ownership, the reverse mortgage, or the sale with guaranteed rent (a formula similar to bare ownership in which a small rent is paid and a higher amount is obtained for the property), are all tax-free financial transactions in which not a single euro has to be paid to the Treasury on the income obtained.
Why are these solutions underutilized in Spain?
But curiously, these methods of obtaining liquidity in Spain are rarely used, perhaps due to a lack of information. The custom of owning a home until the end of one's life and leaving it as an inheritance is so deeply ingrained that for many people it's a taboo subject. But wouldn't it be more logical to seek the financial well-being and happiness of our parents rather than the future of their heirs?
However, in most European countries these operations have been common for many years: a large proportion of English or Nordic retirees who enjoy Spanish beaches from October to June finance their stays with this type of income, which supplements their pension.
A decision about how we want to live the last stage of life
It remains a mystery why so few transactions of this type are carried out in Spain. Perhaps one of the reasons is the lack of reliable and accurate information about these products. For those over 65, obtaining liquidity from their home, whether by selling the bare ownership or through a reverse mortgage, is more than just a real estate transaction; it's a decision about how to face and enjoy the rest of their lives.
As a society, we should consider whether we should leave the wealth we've built to our children, or if it's preferable for older generations to enjoy a higher quality of life and be able to finance their dreams with these types of pension supplements. It's absurd that some people are experiencing financial hardship when they own a home and can continue living there for the rest of their lives with these kinds of financial solutions.
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