Differences Between Selling Bare Ownership and a Reverse Mortgage

For many retirees, their home represents the largest part of their wealth. In retirement, some financial solutions allow homeowners to access the value of their property while continuing to live in it. Two common options are selling the bare ownership of a property and taking out a reverse mortgage.

Although both options allow homeowners to remain in their home, they work in very different ways.

What is a reverse mortgage?

A reverse mortgage is a loan typically available to homeowners aged 65 or older. The property is used as collateral and the homeowner receives money as:

monthly payments,
a lump sum,
or a combination of both.

The homeowner remains the legal owner of the property and can live in it for life. The loan is usually repaid after the owner’s death, either by the heirs or through the sale of the property.

What is selling bare ownership?

When selling bare ownership, the homeowner sells the property but keeps a lifetime usufruct, meaning the right to live in the property until death.

The buyer becomes the legal owner but cannot use the property until the usufruct ends.

In exchange, the seller typically receives a single lump-sum payment, usually below the full market value of the home.

Key differences

1. Property ownership

Reverse mortgage: the homeowner keeps ownership.
Bare ownership sale: the property is sold immediately.

2. How the money is received

Reverse mortgage: monthly income, lump sum, or both.
Bare ownership: usually a lump sum payment.

3. Impact on inheritance

Reverse mortgage: heirs can repay the loan and keep the property.
Bare ownership: the property is no longer part of the estate.

4. Flexibility

Reverse mortgage: the homeowner retains more control.
Bare ownership: the sale is final.