Five ways to use your Spanish property to safeguard your retirement

If you’re a retiree and you own a home in Spain, there are several alternative ways you can use it to help guarantee extra income to top up your pension, and they don’t involve selling or renting your home out in the conventional sense.

People in Spain are now living longer and longer and according to the latest data 20,000 Spaniards have reached one hundred years old.

But while Spaniards may be healthier than ever, the cost of living is increasing more and there is a fear that the public pension system may not be enough to withstand the ever-growing number of retirees.

READ MORE: Will there be no public pensions in Spain in the future?

Thankfully, there are ways that you can help safeguard your retirement and make sure you have enough money to live on if you own a property, whether you receive a Spanish pension or one from your home country.

Traditional ways of doing this are to sell your home and use the money to rent instead, or downsize to a smaller home, but there are various alternatives in Spain that you may not have considered.

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Advanced rent

The first option is anticipo de alquileres or advanced rent. In this case, you still get to keep your home, but you don’t get to live in it. Basically you will move out and get a management or financial company to be in charge of renting it out. They then agree to advance you the rental payments when needed, enabling you to get big lump sums too. 

But it’s important to keep in mind that with this option the amount paid in advance together with the interest makes up a debt, which your heirs will have to pay when you pass away.

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Reverse mortgage

A hipoteca inversa or reverse mortgage is essentially a financial agreement like a traditional mortgage, but the homeowner relinquishes equity from their home instead. In return for this, they receive regular payments to help supplement their pension.

It means they can use their home as security or a guarantee to borrow against it. Typically it has a fixed duration but crucially it guarantees that you can continue living in your own home.

Usually in this case, banks require that no other loans or mortgages be outstanding on the property and there must be no other people living in the property apart from the owners. Sometimes there is a minimum value too. For example, Banco Santander offer this service to the over 65s who own a property more than €200,000.

Reverse housing

Reverse housing, or vivienda inversa in Spanish, is the process whereby a retiree sells their house and signs a lifetime rental contract, which allows them to continue living in there and earn capital.

It is very popular in countries such as the UK and France and is starting to be so in Spain too. The owner essentially becomes a tenant, yet can remain in their home indefinitely and can leave the home whenever they want without incurring any type of penalty.

Home Reversion

Nuda propriedad, known as home reversion in English, is when you sell your home, but still maintain the right to live there. Properties under this scheme sell for below market value, so that you have the advantage of being able to stay there. The commercial value depends largely on your life expectancy, which is determined by your age and gender.

‘Nuda propiedad’: The pros and cons of selling your home in Spain while still living in it

You may still have to pay certain taxes and estate agencies fees so it’s important to look into your finances and see if this is a good option for you. It may work well for those who don’t have any children as it means you won’t be able to leave your home on to your heirs like some of the other options here. 

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Real estate annuities

Renta vitalicia inmobiliaria is a contract, formalised in a public deed before a notary, by which a retiree who owns their home sells it to an investor reserving the usufruct of the property for themselves. This means they have the right to leg­ally live in the prop­erty un­til they die, but do not have the right to change it.

In exchange, the investor will pay you a monthly income for the rest of your life and will only be able to do with it what they want when you pass. It also means you won’t have to pay certain housing expenses like IBI and insurance as this will now be the responsibility of the investor.