To release equity from the family home to fund a divorce settlement.
Annette is 56 years old and co-owns a florist with her daughter in Cork. She’s currently going through a divorce.
As part of an agreed divorce settlement, Annette needs to make a €100,000 payment but doesn’t want to have to sell her family home to raise the money. The four-bedroom detached property, which she bought jointly with her ex-husband, does not have a mortgage secured on it and is valued at €450,000.
Annette is financially stable and wants to maintain her lifestyle while living in her own home. She’s looking for a way to raise funds to settle her divorce and she doesn’t like the idea of having to sell up and start again, especially as she plans to gift her daughter her share of the business when she retires.
How the Spry Finance Payment Reward Lifetime Mortgage can help:
The Spry Finance Payment Reward Lifetime Mortgage is a loan, secured on a residential property, available to those aged over 55. As part of the terms of the mortgage, customers commit to making monthly interest payments for an agreed Payment Reward Period of between 1 and 10 years, and are rewarded with a discounted interest rate.
At the end of this Payment Reward Period, assuming all payments have been made, the customer becomes eligible for a second discounted interest rate, which is fixed for the life of the mortgage. A Payment Reward Lifetime Mortgage is only repayable on the death of the customer or if they sell the property or move into long-term care.
In Annette’s case, she can pay the interest on her Payment Reward Lifetime Mortgage and after the end of the Payment Reward Period, she can decide to stop making payments altogether. If she chooses the latter option, the monthly interest will be added to the loan balance and will be subject to compound interest (as per the standard application of interest to a Lifetime Mortgage).
The Payment Reward Lifetime Mortgage provides Annette access to the cash lump sum she needs up front to settle her divorce. Using Spry Finance’s Payment Reward Lifetime Mortgage Calculator, Annette at age 56, can release the funds she needs if she commits to making interest payments over an 8 year Payment Reward Period. Then, when her income reduces in retirement, she will no longer have to make the interest payments unless she chooses to. This means that even though she won’t have her business income, there will be less pressure on her finances.
By choosing the Payment Reward Lifetime Mortgage Annette can:
STAY IN THE FAMILY HOME SHE LOVES: Annette doesn’t need to downsize and can stay in her home, making affordable monthly interest-only payments during the Payment Reward Period.
HAVE FLEXIBILITY FOR THE FUTURE: After the agreed Payment Reward Period, Annette no longer has to make any payments. However, she can choose to make optional repayments of up to 10% of the original loan amount per year to manage her loan balance without incurring an Early Repayment Charge if she wishes to.
PASS THE AFFORDABILITY TEST: Annette’s ability to make repayments will be based on her self-employed income and ability to make interest-only payments throughout the agreed Payment Reward Period. As with a standard Lifetime Mortgage, the remainder of the loan will usually be repaid on the death or move to permanent long-term care of the customer.
HAVE MORE CERTAINTY: Fixed interest rates, both during and after the Payment Reward Period will provide Annette cost certainty over the lifetime of the loan. All three interest rates (i.e. Reward Rate, Second Reward Rate and Contracted Rate) are fixed and will be agreed with Annette before taking out her loan.
FEEL FINANCIALLY SECURE: As a single income household, Annette’s future financial position is more secure. If, due to unforeseen circumstances, Annette later cannot make all agreed interest-payments, the missed payments will be added to the loan balance and the higher Contracted Rate will apply. There is no risk of arrears, repossession or collections activity.
SETTLE HER DIVORCE: The Payment Reward Lifetime Mortgage provides Annette with an affordable and sustainable means of sourcing the funds she needs to settle her divorce.
This case study is for illustration purposes only. It is not a real customer example.
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