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 | Category: Finance & Mortgages