Just as the word implies, senior loans are a loan that is only aimed at the elderly in the population. It is a way to get rid of money that might otherwise be locked in villas or condominiums.
This is how senior loans work
Very many of those who are pensioners today live in villas or condominiums on which they have paid off the loan, or large parts of the loan. In addition, the market value of these homes has skyrocketed in recent years. All in all, this means that the pensioner’s mortgage loan is very low.
Since the bank considers that e.g. a house is a safe asset, so this can be mortgaged even if you are older. This means that money is paid out that can be used for travel or other things that ruin life. A smart way for the elderly not to lock their capital in the house, which would otherwise happen. However, if you intend to take a senior loan, you should be familiar with which variant is best suited.
The senior loans are available in three different variants.
With this variant, the senior does not pay any interest, but instead the loan is built on each month, which makes the debt bigger and bigger. The entire total amount of debt is then required by the bank when the loan matures. Theoretically, however, this is counted as the interest being paid, which means that you can deduct the interest rate on a declaration.
Interest rate adjustment
In this case, a lump sum is paid out when the loan is taken. This is in contrast to the above where payment is made every month. The entire interest debt is calculated during the loan period and paid when the loan has expired. This means that the interest deduction can also be deducted at this time.
With an insurance solution, returns are combined with interest. The loan is taken from a loan institution and the entire sum is then placed into insurance. Each month a sum is distributed from the insurance as well as a sum to the interest rate. The money that remains is given interest. An interest paid when the entire loan is due. In this way, the total cost is reduced. However, it should be borne in mind that you must pay an annual fee for this insurance, while most have a management fee of 0.5-1% of the total amount. It is therefore necessary that the interest rate on the insurance is relatively good for it to be profitable with this variant.