Reverse Mortgage vs. Sale of Bare Ownership (with Life Usufruct)
Do you need liquidity and want to keep living in your home?
When someone owns their home but wants to increase income, cover medical expenses, help family members, or simply live with greater peace of mind, two common options usually come up:
- Reverse mortgage
- Sale of bare ownership with a life usufruct
At first glance they may look “similar” because in both cases you can continue living in the property, but legally and financially they work very differently.
1) Reverse mortgage: what it is and how it works
A reverse mortgage is a loan granted by a financial institution, using your home as collateral. Unlike a “standard” mortgage, you do not make monthly repayments.
- You remain the owner of the property.
- You keep the right to use it (you live there as usual).
- You receive money as a monthly income, a lump sum, or a combination of both.
Where is the “fine print”? Because it is a loan, the money is not “free”: a debt accrues (principal + interest + possible fees/expenses). That debt is usually settled upon death (or when the contract ends, depending on the terms).
What happens to the heirs?
Heirs typically have the following options (depending on the contract and the specific case):
- Pay off the debt and keep the home.
- Sell the home and repay the debt with the sale proceeds.
- If it is not viable or they are not interested, consider renouncing the inheritance.
Typical requirements
- Be the owner of the property to be mortgaged.
- It must be the primary residence (and effectively used as such).
- Be 65 years old or older, or be in a situation of dependency, or have a recognised disability of 33% or more.
- Have legal capacity to enter into the contract.
- Property valuation/appraisal (to set the value and the maximum amounts that can be drawn).
In practice, some institutions may ask for proof of continuous residence (e.g., registration as resident at the address for the last 3 years).
In short, with a reverse mortgage, the home can remain in the family, but there is a risk that the accrued debt forces a sale if there is not enough liquidity.
2) Sale of bare ownership + life usufruct: what it is and how it works
This is not a loan: it is a sale. You sell the bare ownership to a buyer (often an investor) but keep a life usufruct, meaning you retain the right to live in the home for the rest of your life.
- You receive money now (usually a single lump sum).
- There is no debt or interest.
- You can continue living in the home.
Key difference: you are no longer the owner (you have sold the bare ownership). When you pass away, the buyer consolidates full ownership, and the home has been theirs since the purchase (subject to your life usufruct).
What happens to the heirs?
Here the impact is more direct:
- Heirs do not inherit the home (because it has been sold).
- They may inherit the money obtained, if it remains in the estate and is planned properly.
Basic requirements
- Hold full ownership of the property (or, if there are several owners, all of them must consent to the transaction).
- The seller must have legal capacity to give valid consent.
- Execution by public deed before a notary (and registration, for full legal certainty).
In conclusion, with the sale of bare ownership, you gain liquidity without debt, but the home ceases to be “inheritable” as real estate.
Key Differences Between a Reverse Mortgage and the Sale of Bare Ownership
| Reverse Mortgage | Sale of Bare Ownership (with Life Usufruct) |
| It is a loan | It is a property sale |
| It creates debt | It does not create debt |
| You retain ownership | You transfer ownership |
| The property can be inherited | The property is no longer inheritable |
| Financial cost (interest accrual) | Sale price reflects a discount on market value |
Which option may suit you better?
If your priority is to keep ownership and leave open the option for the home to stay in the family, a reverse mortgage often fits better (assuming the financial cost).
If your priority is immediate liquidity with no debt, and you are not concerned about the property passing to someone else, a bare ownership sale with life usufruct often fits better.
IMPORTANT: there is no universal “best option”
Each case depends on factors such as:
- Age, health status, and life expectancy.
- Whether it is the primary residence and its land registry situation.
- The real need for liquidity (lump sum now vs. monthly income).
- Heirs and family objectives.
- Tax implications and costs.
- The specific contractual terms.
If you have any questions, tell us about your situation. At Imont, we will give you an estimate based on real figures and explain which option minimises risks. Shall we talk?
