The value of your home minus any outstanding mortgage on it can be described as your ‘equity’. Equity release is a process that allows you to release this cash from your home. If you go ahead with an equity release mortgage then you receive a tax-free cash lump sum or extra income, which you can spend in any way that you choose (home improvements, vacations, paying off debts, help family, etc.). As you are not actually selling your home, then you can continue to live in it.
A lifetime mortgage is the method that most people use to release the equity in their home. Using this approach, you take out a loan against the value of your property. Interest does accumulate on the loan, but you do not have to make any monthly repayments. You do not have to pay back any money at all whilst you are alive. The lender gets their money back only after your death, at which point the house must be sold.
Your age, how much your home is worth, and the amount remaining on your current mortgage will determine how much cash you will receive. To get a general idea of how much cash you may be able to release from your home, then you can use an online equity release calculator. They are free to use and are pretty accurate. Just enter in some general details about yourself and it will give you an estimate based on how much people in similar circumstances to yourself have received in the past.
If you are seriously interested in equity release, then you should get independent advice, as although equity release can provide you with financial freedom, it is not always the right decision for everyone. You should be able to get a free initial no-obligation consultation with a personal independent adviser, who will assess your individual circumstances and tell you whether an equity release plan is the best option for you.
Your independent adviser will present their research to you and give you a copy of their findings so that you can review them in your own time. They will provide reasons for the course of action that they recommend. All figures and costs will be plainly laid out too. They are legally bound to tell you everything that is relevant to the transaction, so you can rest assured that they cannot defraud you out of your money.
You do not need to give your equity release advisor an immediate decision. If you do decide to proceed, then simply contact them and tell them so. They will take care of all of all the paperwork for you and will keep you updated as to what is happening at any given time. Up until, and even after, the time that you receive your money, they will act as your full representative.
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
Access competent ideas about what is a pip in forex trading – welcome to your own knowledge pack.
RSS FEED
