Elderly people who are looking for means to cover the cost of living at old age, probably at the end of 2008 may have the possibility in Belgium of taking up capital at a mortgage lender under the supervision of the Banking, Finance and Insurance Commission, or of receiving a monthly sum of money from this lender called "Omgekeerd woonkrediet (crédit-logement inversé)", the guarantee, i.e. a first mortgage, being their own house - or their second house -, which they continue to own and in which they can continue to live. This possibility will probably be introduced at the end of 2008, for currently, we are waiting for a new federal government to be appointed after the elections in May this year and for the options to be taken by the future Minister of Economy. In the case of a standard type of mortgage loan, there is a periodical reimbursement of capital and interest, whereas an Omgekeerd woonkrediet is characterised by the absence of periodical reimbursements. The interest, which is capitalised, as well as the capital are payable only at the end of the contract. At that moment, the elderly people or their heirs may opt for reimbursement, the amount to be paid being limited to the value of the house. If they don't opt for reimbursement, the mortgage lender can cash the house. This means that solvency is no issue when it comes to signing an Omgekeerd woonkrediet. The final debt is limited to the maximum value of the house at the end of the contract.
Many critics are concerned about the traditional way of inheriting real estate getting lost due to this new credit technique. In fact, all forms of real estate, even a person's own home, is an investment. The investor is even free to sell it (with out without annuity). If the heirs don't agree with an Omgekeerd woonkrediet, they will have to look after their parents financially for many years.
Jo T'Jampens is Eerste adviseur – Premier conseiller at Union Professionnelle du Crédit (UPC), membre de Febelfin Beroepsvereniging van het Krediet, lid van Febelfin, Brussels, Belgium. Mr. T'Jampens is a legal advisor at the Berufsverein and secretary of the working party on reverse mortgage of the UPC.