What is Equity - Spry Finance

What is ‘Equity’?

Your home’s equity is its current market value, less any money you owe on it. For example, if it is worth €400,000 and you owe €100,000 on a mortgage, then you have equity of €300,000 in your home.

What is Equity Release?

Equity release gives people who own their own home access to cash, based on the value of their property. A Lifetime Loan from Spry is a form of equity release for people aged 60 and over. It releases a tax-free lump sum that can be used for any purpose. You still own your own home and can live in it for as long as you wish, the only requirement is that you keep your home in good repair and insure it to cover rebuilding costs.

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How Does it Work?

The money you receive is secured against your home, much like a standard mortgage. If you are 60 years old or older, Spry Finance will assess how much you can borrow based on the value of your home.

Unlike a standard mortgage however, you don’t have to make regular repayments. Instead, interest is added to the loan over time. This is repaid from the sale of the property after your death or when you permanently move house. Until then, you remain the legal owner of your home.

Optional Repayments

To help you manage the loan balance, you can choose to make regular repayments to service the interest and manage the balance of your loan without incurring an Early Repayment Charge (ERC) if you wish.

You can do this by making regular monthly direct debit repayments or by electronic payment
You can choose to pay up to 10% of the original amount of the loan advanced per year without any possibility of an Early Repayment Charge (ERC)

Why Choose Equity Release?

Taking out a Lifetime Loan makes sense for those who want to release equity tied up in their home. This gives you a cash lump sum without having to sell your home, while also allowing you to choose if you want to make repayments. If you do choose to make repayments, it will help manage the balance of your loan, however it’s not an essential requirement.

You also benefit from a No Negative Equity Guarantee, which means you’ll never be required to pay more than your home is worth. So if your home’s value ever drops below the amount owed, you won’t be required to pay the balance.

How Much Can You Release?

The amount of equity you can release depends on your age and your property’s value. Starting at 60 years old, you can borrow up to 15% of the property’s value. This amount increases each year by 1% to a maximum of 40% for anyone aged 80 or over. If two people are borrowing, both need to be at least 60 years old.

The minimum that can be released is €20,000 and the maximum is €500,000, though we recommend you only take out the amount you require.

What Can You Use a Lifetime Loan For?

You can use a Lifetime Loan for any purpose, the decision is entirely yours. Here are just a few examples of what customers have used their Lifetime Loan to fund:

Home Improvement

If you want to improve any aspect of your home, for example, update the bathroom or kitchen, add an extension or future proof. Releasing the equity that has built up in your property can be a simple way to make those changes.

See more about equity release for home improvements here »

If you’re planning on making your home more energy efficient, our new Green Lifetime Loan combines the features of the standard Lifetime Loan with a reduced interest rate and set-up fee.

See more about the Spry Finance Green Lifetime Loan here »

Refinance Debt

If you have debts which require regular repayments, a Lifetime Loan could go towards paying these off. However, you should not use equity release to borrow more than you actually need to. We strongly recommend that you seek independent financial advice to ensure that you are not paying more.

Supplementing your Income

Some customers choose to release equity from their home to supplement their monthly income.

Pay Off Mortgage

You can switch from your standard mortgage to a Lifetime Loan by using a portion of the equity you release to clear the existing mortgage. You can still choose to service the repayments.

See more about switching to a Lifetime Loan here »

Help Family Members

Funds raised by releasing equity can be used to assist family members. It could go towards a deposit for a house, a wedding, or help them start a business.

Pay For Care

If you need to cover the cost of ongoing personal care, you can use a Lifetime Loan as payment towards the cost of caring for a loved one at home.

Equity Release alternatives

When considering a Lifetime Loan, it’s important to review the alternative options. Here are some worth considering:

Downsizing Your Home

If your current property is larger than you now need, you could move to somewhere smaller. Many factors should be considered before taking this step, like the availability of suitable property in the area where you wish to live, and the costs, legal and otherwise, involved in selling a property and buying a new one.

Support From Friends and Family

If your family have the financial means, they may be able to offer you a gift or a loan.

Standard bank loan / re-mortgage

If you can afford to make regular repayments, it may be worth discussing your borrowing options with a bank or credit union.

Renting or Letting Part of Your Home

Rented accommodation is in short supply, and letting a section of your home can generate a regular income which is tax-free in some situations. Be sure that you’re happy to share your home and it offers all the facilities that tenants require. We also recommend discussing this step with your family.

To find out more, visit citizensinformation.ie

Pros and Cons

As with most other financial arrangements, a Lifetime Loan has positive and negative aspects. Since this is an important decision with long-term consequences, all the pros and cons should be considered before making your final decision.

Advantages

You can unlock cash from your home, tax-free, to help meet your needs in later life.
You’ll always retain full ownership of your home and can stay in it for as long as you wish with a Spry Finance lifetime mortgage.
You can choose to make reduced or no monthly repayments to suit your circumstances.
You’ll never owe more than your home’s worth with a Spry Finance lifetime mortgage.

Drawbacks

A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly.
Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits.
Equity release may also leave you with limited or no property equity remaining.
Equity release will reduce your financial options in the future.
A lifetime mortgage is a long-term financial product and is not designed to be fully repaid until the death or entry into long-term care of the last remaining borrower, otherwise early repayment changes may apply.

Fees and Charges

It’s important to be aware of the various fees and charges that apply to a Lifetime Loan. These include a €1,500 set-up fee which can be paid immediately or added to the loan. We always recommend paying this fee upfront because if you add it to the loan, it will mean paying more over time as interest will incur.

If you make any changes to the loan (such as adding or removing a borrower) a €500 loan variation fee will be applied. To contribute toward Spry Finance’s legal and other costs, a €100 loan redemption fee is payable when the loan is fully repaid.

Finally, other costs such as an early repayment charge (payable if the loan is repaid within ten years) and fees charged by your solicitor may also add to your costs.

Never Owe More Than the Value of Your Home

Our No Negative Equity Guarantee ensures that if your property’s value drops below the amount of your loan, you or your estate will not have to pay the balance. You will never owe more than the net sale proceeds of your home.

The net sale price does not include costs such as solicitors’ and estate agents’ fees.

Eligibility

You can apply for a Lifetime Loan if you own your home, are resident in the Republic of Ireland and are aged 60 or over – if two are borrowing, both must be 60 or over. Unlike a regular mortgage, there are no basic income requirements.

Insurance and Home Maintenance

It’s important when taking out a Lifetime Loan that your home remains appropriately insured and maintained at all times. This is to ensure that any damage can be repaired and the property’s value is protected.

Getting independent legal advice

To ensure your interests are protected, it is essential that you obtain expert professional legal advice before applying for a Lifetime Loan.

A lifetime Loan is an important decision and will have long term effects. Having independent guidance about all legal aspects will help you to make an informed decision.

Speak to Family and Friends

Besides seeking legal advice, it’s important to explain your thoughts to trusted family members and friends, as your decision may have a direct impact on them. They may also give you insights and explain possible consequences that you may not have considered.

Getting Independent Financial Advice

We also strongly recommend seeking independent financial advice from a Qualified Financial Advisor, mortgage broker or the Money Advice and Budgeting Service (MABs)

FAQs

How much can I release?

Depending on the value of your property, you can release between €20,000 and €500,000.

What if I still have a mortgage?

You can’t maintain a mortgage from another provider alongside a Lifetime Loan. Any existing mortgage will need to be repaid in full using a portion of the equity you release.

Do I need a solicitor?

Yes, professional legal advice is essential in order to ensure your interests are protected and make you aware of all the legal implications of taking out a Lifetime Loan.

Will I still own my property?

Yes, you remain the legal owner of the property until it is sold. This will happen either after you die or if you decide to move. When you sell your house, the loan becomes due for repayment.

What happens after I die?

The property will be sold and the proceeds first used to pay off the current balance of your loan, including the interest that has built up on it. The remaining money will be distributed according to the wishes expressed in your will.

Can I leave some inheritance?

Once the Lifetime Loan is repaid in full, you are free to do what you wish with other money and assets. You should consult a solicitor when making your will to ensure that your wishes are clear and can be carried out.

Can I end the Lifetime Loan earlier?

Yes, if you are in a position to pay off your loan early, you can do so. However, if you decide to pay it off within ten years of first taking it out, you will be liable for an early repayment charge as well as the standard €100 loan redemption fee.
Read more about optional repayments and charges here »

Am I responsible for home maintenance and insurance?

Protecting the value of your home is important and you will need to maintain it and undertake any necessary repairs. It must also be insured to cover any potential rebuilding costs.

Can I top up my loan?

No, you can’t top up an existing Lifetime Loan. Instead you would have to take out a new larger loan and use it to pay off the original loan. To do this, the combination of your age at that time and the property’s value would have to exceed your current Lifetime Loan balance. Product eligibility and terms and conditions apply.

Get in Touch

If you want to take things further, we will work with you to build a clear picture of your own personal needs and whether or not a Lifetime Loan is suitable to meet them.

We will guide you through the process, telling you exactly how it all works. The first step is to get in touch with us.

New Loan Enquiry

New Lifetime Loan Enquiry - Contact Spry Finance