July 19, 2024

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Buying or selling a home with an annuity gaining popularity: what exactly does it mean?  What are the risks you take?  |  MyGuide

Buying or selling a home with an annuity gaining popularity: what exactly does it mean? What are the risks you take? | MyGuide

Spaargids.beBuying a home doesn’t have to come with a large mortgage. An annual purchase also provides the possibility of acquiring your own home. But what exactly is the annuity? What are the pros and cons? And how popular is it? Spaargids.be Everything figured out.

By Gianni D’Angelo, in collaboration with Spaargids.be

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With an annuity purchase, you don’t pay a one-time amount: You pay the total amount of the purchase in parts or installments. This purchase is usually accompanied by an advance known in the industry as a “package” and a monthly interest that is usually indexed. As an interest payer, your obligation to pay ends upon the death of the beneficiary or if the fixed term stipulated in the contract expires. For this reason, seniors are usually the selling party in the annuity sale.

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Full ownership, usufruct and package

There are several options when buying or selling for an annuity. In the event of a full ownership sale, the buyer may settle immediately in the home. However, the sale is usually done at an annuity in usufruct. In this case, the seller may continue to live in his home until his death.

With an annuity sale, parties can choose a limited or unlimited term. In the first case, it is specified how long you must pay interest to the seller. For an unlimited period, the buyer pays monthly interest to the seller until the latter dies.

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When completing an annuity purchase or sale, you can choose an agreement with or without a package. This package is an agreed advance. The amount is usually between 10 and 20 percent of the home’s value. Another option with buying or selling annuities is whether or not to offer indexed interest. If the indicator is chosen, the benefit is adjusted for the increase in the cost of living.

The amount of the annuity depends on the age and life expectancy of the seller. So the limiting factor is how long the seller lives on average. To calculate this, the notary uses the death tables.

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What are the advantages?

Buying or selling on an annuity provides benefits to the buyer and seller. A buyer can quickly become a homeowner if the seller dies before the expected date. Moreover, he is not obligated to borrow a house because he does not have to pay the amount in one go. An important note here: the annuity purchase property cannot be used as collateral for a mortgage.

If there is a bouquet, he can get other credit, such as a personal loan.

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This is the big advantage to the seller: While he continues to live in the home when selling in usufruct, he earns monthly interest. So he has more regular income. If interest is indexed and there is a general rise in prices, the seller will receive a larger amount. If the home is sold to a private individual, the seller does not have to pay taxes on the interest.

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What are the disadvantages?

Along with the advantages, there are also disadvantages. Buying an annuity home can be expensive if the seller lives longer than expected, unless both parties specify an interest payment deadline in the contract. As a buyer, you are also not entitled to a tax deduction. Sometimes the package is too high, so you have to go to a financial institution to get credit. The costs of buying a home in annuities can be higher than the cost of a traditional sale.

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After the usufruct sale, you as the seller are no longer the owner of your home. If the seller lives longer than the agreed end date of the interest to be paid, he will not be entitled to an annuity after that end date. However, he may continue to live in the house.

Popular buying and selling in annual installments

Buying or selling homes on an annuity is nothing new. According to real estate specialist Trevi, they are more established in Brussels and Wallonia than in Flanders, but the company sees a positive development. According to real estate website Immoweb, 8.1 percent more properties with annuities were offered between January 1 and September 30 this year compared to the same period last year (1,448 in 2021 and 1,566 in 2022). Trevi says that the demand for homes on the pension is greater than the supply.

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Still a fan of the classic home purchase via a mortgage loan? Through the box below you will find the best mortgages to suit your situation and budget.

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