A lifetime sale transfers ownership of a property in exchange for initial paid-up capital and a pension paid until the day of death. What is it? What is the interest of a life purchase today? What are the disadvantages? And how does have a life purchase through a mortgage? So many questions that raise many thoughts about the optimization of this real estate operation.
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- The purchase in life
- The benefits of buying in life
- The disadvantages of a real estate purchase in life
- The Scarlett of purchase in life
The purchase in life
The sale in life is a usual deed of sale to which particular payment terms apply. Upon the transfer of ownership, the buyer will pay the seller an initial amount called “bouquet” and an annuity throughout the operation.
It is a sort of wager on death. This leads to an ethical problem, even if the operation brings many benefits to both parties.
The life insurance bases its principle on the longevity of the seller.
The benefits of buying in life
In an economic context in recession, future buyers may want to turn to purchase in life.
The life annuity allows for a lower initial investment and a longer amortization of the debt. In addition, it is possible to obtain a capital gain on the operation at the end.
The selling price is set freely between the parties on the basis of the market value of the property, but also on the life expectancy of the annuitant. Note that the sale will lapse in the event of knowledge of a state of illness of the creditor at the signing of the act. The heirs can then assert their rights, in which case the sale will be canceled.
The disadvantages of a real estate purchase in life
The sale based on the life expectancy of the annuitant, it can prove to be a bad operation if it lives for many years. The risk is having to pay more than the market value of the good.
The advice before the purchase is to measure the risks associated with the transaction and to respect at least one generation of difference between the buyer and the annuitant.
We all remember the Jeanne Calmant case, who died at the age of 123 years, has been right of its life annuitants died before it.
The Scarlett of purchase in life
Most banks refuse Scarlett life. The granting of a mortgage comes in return for a mortgage guarantee taken on the property. However, in life, this guarantee cannot be applied, the bank can not seize the property occupied by the annuitant.
In the case of a free life annuity, where the property would be intended for rental, the bank can grant you a loan on the same basis as for a simple purchase of a rental residence. It will nevertheless be required to ask you for greater guarantees against a higher risk and a complex financial arrangement.
In general, the financial mechanism of the life annuity is not studied to be financed by a mortgage.