"Umkehrhyphothek" and "Leibrente" solutions for real estate owners

Real Estate
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Dear Mustachian

reaching the 50th years of age with a FI granted by the income of 3 homes rented, should happen that the rent is not enough or things/life plans change and cash is needed, it seems that there are 2 solutions to convert in cash/income properties without selling them:

  1. “Umkehrhyphothek” (Reverse mortgage): Practically you get a loan on your home, but the interests are taken out in advance, therefore no check of your income or pension happen. Of course the home must be without/almost without any mortgage. For example you get CHF 500’000 loan for your home worth 1 million. From this amount the bank detracts the full interests over 10 years (if interest rates are at 2%, 2% x 500000 x 10 = CHF 100000) and you get CHF 400’000 payout.

  2. “Leibrente” (life annuity): Practically you sell your home with the right to leave there for the rest of your life.

Both models quite common in USA and UK, but quite rare in Switzerland.
Has anyone of you concrete experiences with some of these models?

They seems to be very inconvenient with tons of costs, almost no worth for a real “mustachian”, but anyway to hear some concrete experience would be nice.

1 Like
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The swiss „Leibrente“ would be Nutzniessung, no? This needs to be declared in the Grundbuch and is quite common in Switzerland.

Edit: the one with Nutzniessung i know are, I think, in an other situation than you describe it. They gave the property to their kids or others close people at a discounted price but made sure to have the Nutzniessung.

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In Italy the second option is common and called “nuda proprietà”, where you sell the flat/house below market price (the cheaper the younger you are) and have the right to use it until you die.