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Lifetime Loans & Equity Release

- Updated: 04/12/2012

What is a "Lifetime Loan" and am I eleigible to apply for one ?

Lifetime Loans & Equity Release

What are they?

A lifetime loan runs for the rest of your life and is a simple way to release equity from the property that you own in Spain, or in the UK.

With so many different financial options to make your choice from on the market, chosing the right product for you can be a bit of a minefield!

So how do you make sure you retain your financial security whilst enjoying the benefits of the money that is tied up in your equity?

Complicated? Not really, we have identified just a few of the decisions that you should be aware of before embarking on this particular kind of service...

  • No income proof required
  • Paid to you as a lump sun
  • You retain full ownership of your property
  • "No negative equity guarantee" provided
  • The highest loan to valuation ratio available in Spain
  • No further monthly payments required to be made
  • You are not required to make any investments

If 60 or over, these plans allow you to borrow a percentage of your Spanish Property value without having to make any monthly payments of interest or repayments of the loan. Each year interest is added to the loan and also to any interest that has previously been added.

Unlike a conventional mortgage there is usually no set repayment date. The loan becomes repayable on the sale of the property, when the last applicant dies or moves into long-term care and therefore has no use for it. The amount repayable will include all the interest that has been added. If the loan is repaid for any other reason, an additional early repayment charge may be payable. If there is excess equity upon death this will be returned to your estate once your account is settled.

The amount you can borrow is calculated from your age(s) and the value of your property. The younger you are, the longer the Loan period will be in effect and the higher the risk that it could erode all of your equity. Because of this, the plan providers usually only allow younger applicants to borrow a smaller percentage of their property value. We only recommend plans with a "no negative equity guarantee" therefore your debt can never exceed the value of the property.

Although a mortgage with no monthly payments can appear attractive, the total loan with rolled-up interest can increase rapidly, especially after a number of years. It's easy to assume that house prices will continue to increase each year, but there is no guarantee of this.

In effect, a roll-up mortgage is a race between how much the total loan increases to each year, compared with how much your property is worth each year. The difference is the amount you, or your estate, will receive when your loan is finally repaid. If the Spanish Lifetime Mortgage is as much or more than the value of your property, there will no longer be any value for you or your family to benefit from.

Bear in mind that the longer you live, the more interest that will have to be repaid.

Tumbit always recommend that equity release and Lifetime loans are discussed in depth with your family and Lawyers before making any final decision.

Comment on this Article

 
We are both over 65 and live in Spain and own our own property and was wondering if equity release is available ?
Sheila Stevens - Wed 20th Nov 2013
Marylyn : Over recent years - certainly since Spanish Banks have been under the EU's spotlight - Many lenders have suspended their offer of this kind of product. You 'might' get lucky, but this would depend on the total value of equity in your property and your age.
Tumbit - Admin - Sun 20th Jan 2013
Hi, I live in Spain and own my property and I was wondering if equity release is available ?
Marylyn - Sun 20th Jan 2013
Both aged 65,property worth 90,000 euros could we get a lifetime loan or do equity release if so what percentage ? Thank you in advance
Patricia King - Mon 29th Oct 2012
If the property that you are looking to borrow against is in the UK AND you are UK Residents, then you may be able to do this given that one of you is under 60. If, however, the property is in Spain AND owned in joint names, then you will be unable to do this as BOTH PARTIES are required to be over 60 years of age.

However, you may be eligible to remortgage your property in order to raise funds OR apply for a Personal Secured Loan (Click HERE for more details )

Tumbit - Admin - Fri 27th May 2011
we are looking to raise some cash to start a business, we own outright a property we do not live in, would equity release or other work for this. my husband is over 60 but i am not
Alison Walker - Fri 27th May 2011
we have no morgage on our villa.we wanted to take equity release but we understand we both have to be 65 years old.we have been reading about lifetime loans.I am 64 and my wife is 61 next birthday do you think this would be a better proposal for us.our villa is worth approx 140 .000 euros.looking forward to hearing from you.
Mr Mrs Tomlin - Wed 8th Dec 2010