Property Guides and Information for the Costa del Sol, Spain

Asset Rich – Cash Poor How to Access Part of the Value in Your Home

By Bill Blevins, Managing Director
Blevins Franks

As baby boomers hit 60 years of age – which is now being described as the new 40 – they still want to enjoy life to the full.

This may not always be the case if finances don’t allow. True, many of today’s baby boomers are asset rich in that the value of their property, or the property bequeathed to them by their parents, has risen astronomically over the last decade or so.

But bricks and mortar won’t pay for a carefree life in Spain, for holidays, entertainment, unexpected household expenses or that new car you have always dreamed of. You may also want to help out your children and grandchildren – a wedding, university education, a step up the housing ladder – and baby boomers know how important that can be! So how do you raise spendable cash or improve your disposable income?

It is possible to remortgage your house through many of the schemes you see advertised in Spain as “equity release”, but in fact most are simple short term mortgage arrangements with all the risks of many of the schemes sold in the UK in the late 80s which led to thousands of individuals losing their home when the property crash hit the UK.

British expatriates in Spain have so far had this opportunity for equity release, raising capital from their property to fund retirement expenses, but most of these schemes are higher risk arrangements where the loss of one’s home is a real possibility if the property market and the investment markets decline significantly as they have in the past. Indeed, in most of the schemes it is possible for you to end up owing more than the value of your property if markets fall! It is for this reason my Firm have stayed out of this precarious market until now. We have developed and launched a new arrangement – the Seniors Money Lifetime Loan – as an exciting new alternative which is free of the risks associated with most other Spanish equity release schemes.

Firstly, let’s take a look at what you need to be aware of with many of the existing arrangements for so called “equity release”.

• These schemes are unregulated with the Spanish authorities and therefore unsafe. Your money is unprotected and there is a risk that you could lose the bulk of your assets, the results of a life of hard work.

• The mortgage, which can be for up to 100% of your property valuation, is arranged for a five year period when it can be recalled or renegotiated. This is more likely to happen if property values drop.

• The cash raised cannot all be used for anything you wish. Usually, only 10% of the monies raised will be at your disposal while 90% has to be invested in certain types of funds outside of Spain to cover the interest due.

• You need to make interest payments on the loan. The value of the invested funds may fall and the yield may not meet the cost of the interest payments. If you fail to meet payments, the lenders have the right to sell your home without notice to recover the loan.

• If you settle the loan early and it is during a fixed rate period, you may have to pay penalties.

• If the price of your property dropped the lender might ask for additional security for the loan or foreclose and force a sale.

• The loan currency and the investment currency may differ. If the investment currency should fall against the Euro the investment returns may not cover the loan value.

• If you have to sell the property and the proceeds do not cover the loan repayment then the lender will claim for the shortfall against other assets of your estate.

Let’s compare these risks with the Seniors Money Lifetime Loan:

Seniors Money is fully compliant with all legislation and regulation governing the way it conducts its business in Spain.

Seniors Money’s advertising and marketing material is fully compliant with Spanish consumer protection legislation.

You can never borrow more than 45% of the value of your property. You can borrow up to 15% of your home value at age 60 rising by 1% a year to a maximum of 45% at age 90 and older. There is a maximum loan amount of €500,000; minimum loan amount is €40,000.

The cash raised can be used for any purpose you wish. You have access to the full amount approved and no part of it has to be re-invested.

There are no regular payments to be made. The interest is added to the loan balance and is repaid when the property is sold.

You have the option to repay interest at any time, without any penalties.

As monies do not have to be invested elsewhere to cover the loan, currency movements and exchange rates are not something you have to worry about.

A guarantee is provided that you will never owe more than the value of your property regardless of what happens to property prices, provided you are not in default of the terms of the loan.

In the UK in the 1980s unregulated equity release schemes similar to many of the Spanish schemes operated and thousands of borrowers lost their homes. Many of you may recall this happening. The new Seniors Money Lifetime Loan is different. It is free of the risks of many of the other Spanish equity release products. It gives not only the cash you require but peace of mind too. Contact us now for more information.

September 29, 2006 | Permalink

Releasing The Equity In Your Home

By Bill Blevins, Managing Director
Blevins Franks

My feature two weeks ago introduced a new equity release product for Spain, the Seniors Money Lifetime Loan. This week’s feature provides a little more information about how the loan works.

The Lifetime Loan is available to all homeowners living in Spain provided they are over 60 years old. The property must be freehold, of conventional construction, in good repair and with no, or very little, mortgage on it.

While there is a minimum loan amount of €40,000, the amount you are able to borrow depends on your age. The younger you are, the less you can borrow (in terms of the percentage of the value of your home), and the older you are the more you can borrow.

Anyone aged 60 years can borrow 15% of the value of their home. This percentage increases by 1% each year, up to a maximum of 45% from age 90 upwards.

In the case of a married couple, or any two people sharing a house specifically named as the “nominated residents”, one person can be younger than 60 years old, but not younger than 55 years. The age of the younger borrower is used to calculate the loan.

Here are some examples:

Mr Smith lives alone. He is 76 years and his property in Spain is valued at €250,000. He is able to borrow up to €77,500 (31%).

Mr & Mrs Jones own a Spanish villa worth €450,000. He is 63 years and she is 56. The loan amount is calculated on Mrs Jones’ age and they may borrow €49,500 (11%).

Mr & Mrs Brown are aged 90 and 87 respectively. Their property is valued at €150,000 so they can borrow up to €63,000 (42%).

In all three cases they will not have to pay back the loan, or the interest, until such time as they pass away or decide themselves to sell their home. If they choose to pay it back earlier they can do so without incurring any penalties.

They can all spend the money on whatever they wish – Mr Smith needs to carry out home repairs and buy a new car; Mr & Mrs Jones want to help their daughter buy a house and Mr & Mrs Brown will deposit half the money in the bank to cover any medical expenses that may occur and use the rest to supplement their future income and make their lives a little more comfortable.

If you choose not to take the full approved amount at the outset you can make use of an “express top up” facility in the future (minimum of €5,000). You can use this to draw money as and when you need it, for example to buy a new car or go on holiday.

As you get older the amount you are able to borrow will increase, so you could apply for a “further advance” (minimum €5,000, provided you meet the age requirements).

Like every other loan, interest will be due on the total amount you borrow, but unlike most other loans you do not need to make regular repayments. Instead the interest is added to the loan each month, increasing the loan balance. The final balance (amount borrowed plus interest and costs) will become due at the end of the loan period.

Most people settle the loan from proceeds from their property sale - whether they do this themselves when they decide to sell (for example to move into permanent care or a smaller, more manageable flat), or arrange for their beneficiaries to deal with it when they sell your property after you pass away. Your family can choose to repay the loan without selling the property if they prefer. (It is important to discuss all aspects of the loan with your family before going ahead.)

In the case of a married couple, or any two nominated residents, the loan repayment will be due on the second death (unless the surviving partner chooses to sell the property first).

There is never a risk that you will owe more than your property is worth. In the very unlikely event that the market value of the property does fall below the value of the loan, the loan is “capped” at the market value and neither you nor your estate will be liable for the shortfall.

The above is a summary. Anyone contemplating such a loan must read all the product details first. Full details are available from Blevins Franks at the Seniors Money office Contact us Now

September 29, 2006 | Permalink

Looking to Increase Your Income or Raise Capital?

Bill Blevins, Managing Director
Blevins Franks

After working hard all your life, retirement should be a time to take it easy, do all the things you didn’t have time for previously and try to live life as worry free as possible.

Unfortunately it’s not always so easy to live the dream. Various ‘hurdles’ get in the way, one of the main ones being money! It’s quite common for those who retired in Spain some time ago to find that the cost of living has increased so much that income and living standards are not as they used to be. In addition it’s too often the case that while income may be adequate for day-to-day expenses, capital expenditure and life’s small luxuries become more difficult to achieve. Many struggle to raise funds for unexpected medical expenses or a replacement car or home improvements.

Worrying about such matters can be very distressing… but possibly unnecessary. For most people living here their most valuable asset is their property, which in many cases has risen phenomenally in value over the last few years creating a valuable asset that you cannot spend…well now you can sensibly access part of that increase in value for any purpose you wish!

For others it is not the need for extra cash, it’s simply that they want to enjoy life to the full and often limited finances prevent this. For some it’s the opportunity to help their children with house purchase, or during a difficult period, or perhaps assisting with their grandchildren’s education.

The frustration for many is that being ‘asset rich but cash poor’ means many reasonable aspirations are often unattainable due to lack of spare income or capital.

Property price increases may have made your property worth more today than you ever dreamed of, but at the same time cost of living increases have eroded your savings probably leaving you with less and less to spend each year. Most people obviously do not want to sell their home to increase their capital or income.

It’s no wonder that more and more people have been looking at equity release schemes as a possible solution.

The problem with many of the existing arrangements for most individuals is that they do not want to be involved in such schemes where the arrangement is possibly going to lead to the loss of their home.

For almost two years my business has been researching alternatives to the schemes commonly available, which we believe are too risky, or too costly, or possibly subject to repayment at short notice for most people needing to raise funds or increase income.

We have formed a new joint venture company, specifically to distribute a new equity release product from Sentinel, the leading provider in the southern hemisphere and Ireland, whose equity release product Seniors Money Lifetime Loan is a dependable winner and offers all of the benefits of true equity release without the risks apparent in most other schemes.

The unique benefits are:

• You keep full ownership of your property and you or your surviving spouse can continue living in it as long as you wish.

• You need not worry about losing your home.

• There are no regular repayments to worry about.

• You may repay the loan or top it up at any time.

• There are no restrictions on what you use the money for.

• The loan is designed to primarily improve your living standards and lifestyle and no investment is required of the proceeds of the loan, unlike most other schemes.

• There is a “no negative equity” guarantee – the loan balance due from you or your estate can never exceed the value of the property, even if property prices fall.

• You can choose whether to take the whole loan at the outset or use it for drawdown over time to provide income.

We are pleased to have finally found a product that does all this and which we are happy to recommend to property owners in Spain.

It’s an opportunity unlike any other currently available in Spain and is fully compliant with Spanish consumer protection legislation. It will be the answer to many home owners’ prayers.

The Lifetime Loan from Seniors Money is available to home owners over the age of 60 (the amount you can borrow will depend on your age) provided you own your home outright.

This winning new opportunity for home owners in Spain is exclusively distributed in Spain by Blevins Franks.

The Seniors Money Lifetime Loan provides you with a practical means to unlock the value you have worked hard to build up in your house, without having to move from the place you call home or place it at unnecessary risk. For more information contact us now.

September 29, 2006 | Permalink