Many retired people ex-pats in Spain are struggling financially, because the exchange rate between the British pound and the Euro is substantially down from the levels it was 2 years ago. This has put pressure on their spending power, which means they cannot go out for 2menu del dia” as often. The knock on effect of this is that the businesses, particularly bars and restaurants are suffering too.
There is a way out if you own a property of €150,000 in value, if the youngest (of a couple) is over 65.A lifteime loan, which has no mortgage repayments can be considered up to a percentage of the value of your property, usually with a “no negative equity” guarantee. Interest rolls up on the amount borrowed, but as the percentage borrowed is lower, the younger you are, the chnaces of the loan being larger than the vaue of the house, is in any case, quite remote.
The funds taken out can be used for any purpose, which means that it can either be invested to produce regular income to top up pensions, or for a special purchase.
Having a loan against property, in Spain, is also beneficial in mitigating Spanish succession tax. You can either release funds from your property, if it is mortgage free or you can use a lifetime loan to buy a property.
Full ownership is retained by the borrower, which means that they keep full control of the valuable asset.
The process to obtain this type of loan is quite straight forward, as there is no requirement to prove income. An independent lawyer is appointed to ensure that the borrowers are, firstly, capable of transacting the contract and secondly fully understand all the implications of their committment. It is advisable to discuss the proposals with other family members, such as children, in order that they understand why you are taking funds out of the property.
If the funds taken out are not needed for a specific purpose, then advice should be taken from an independent financial adviser, as to the best place to invest the funds, in order to maximise the mitigation of inheritance tax for their surviving families.
Consideration must be given, in this respect, as to whether the borrowers are resident for tax purposes in Spain or “non tax residents”. This will have a bearing on the effect of inheritance tax calculations, which tend to favour “Spanish tax residents”, as they are entitled to higher reductions in the tax payable.
If you want to find out more then you can see my websites mortgages in Spainhttp://davidbatesfinancialadviser.net/taxspain.co.uk/ or mortgages in Spainhttp://www.davidbatesfinancialadviser.net/
There are also ways for those under 65 to take money out of their properties, however, the proof of income requirements are quite strict, and many lenders will require a specific purpose for the borrowing to be evidenced, This is OK if you are having an extension built or buying a new car, or even a boat, but there are restrictions on re-mortgages designed for simply taking capital put of the property. For UK ex-pats, you are now required to obtain a credit reference report from companies such as Experian , if you left the UK less than 6 years ago.
David Bates Financial Adviser
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