Poland’s finance ministry has revealed legislation to regulate reverse mortgages and is expected to make its way to Parliament later this year. If passed, the bill would enable seniors over 60 to obtain reverse mortgages on their primary residences.
At present it is nearly impossible for banks to offer reverse mortgages, although some are issued outside the financial sector on the basis of civil agreements.
“We have noted significant interest in the introduction of this type of financial service to the Polish market,” Deputy Finance Minister Dariusz Daniluk said in a statement. “We have received express interest from representatives of the finance sector and potential borrowers alike,” he said.
The Finance Ministry’s bill would allow a reverse mortgagor to choose whether to receive fixed monthly installments or a lump-sum payment from the bank, while retaining the right to remain on the property for the duration of his or her life. Afterwards, the bank has the right to sell the property to recover the value of the loan.
If an owner dies shortly after the reverse mortgage is taken out, however, his or her family can back out of the deal by repaying the loan with interest.
According to the WBJ, the success of the product depends largely on how many lending institutions introduce it. A recent survey by Home Broker found only one bank in Poland has so far declared significant interest in reverse mortgages.
Mikołaj Martynuska, a residential market expert at CB Richard Ellis, expects the new product to catch on in Poland, but he noted that this could take many years. He stressed that mechanisms securing property rights and limiting the room for manipulation will be of utmost importance.
“We are talking about over-60s, whose susceptability to manipulation is relatively greater [than that of younger people], and their ability to assess and verify complicated financial procedures is comparatively lower,” Mr Martynuska said.