How much to borrow?
The Loan to Value table indicates the maximum loan amount you can borrow. This may be more than what you should borrow.
An important part of the Spry consultation process is working with you to establish what your financial circumstances are and whether it is suitable or not to borrow the amount you are thinking of applying for.
Because the loan balance will grow over time, the golden rule is that you should only borrow the amount required right now to meet your financial needs, and for which a Lifetime Loan is a suitable way to fund the financial needs.
If you borrow less than the maximum allowable amount there is no guarantee that you will be able to borrow further amounts at a future date. A new loan application would be required.
However, if you borrow more than you need right now you will pay interest on money that you do not immediately need. You should not borrow more than you actually need.
Depositing the funds from a Lifetime Loan into a bank account will not generate sufficient funds to repay the Lifetime Loan and will therefore cost you money over time. This is not a recommended use of the proceeds of a Lifetime Loan and should only be considered if you have a requirement to have a cash fund available to you at all times, e.g. for emergencies or for peace of mind, and if you are fully aware of and willing to accept the cost implications involved.
Impact on your equity
The equity in your home is the difference between what it is worth and the size of any debt you have secured against it.
After you take out a Lifetime Loan, your future equity depends on what your home will be worth in the future compared to what the loan balance will have grown to. With the interest rate fixed for life you know for certain what that the loan balance will be at any future point but there is no certainty about future house prices.
Taking out a Lifetime Loan may affect your ability to fund future needs including emergencies and future nursing home care. You are borrowing money and incurring interest when you take out a Lifetime Loan. As the balance on a Lifetime Loan increases over time, this may reduce the amount of equity value you have in your house in the future, meaning you may have a reduced amount to fund future needs and emergencies.
In relation to funding future nursing home care, the current Nursing Home Support Scheme Act (“Fair Deal Scheme”) involves a financial assessment and a related contribution from the care recipient to the cost of nursing home care. Part of this contribution arises from the value of a care recipient’s private residence and can be funded by way of a Nursing Home Loan. Currently the Health Service Executive (“HSE”) allows care recipients who have an existing mortgage (including those with a Lifetime Loan) take out a Nursing Home Loan. There is no guarantee that, in the future, the HSE will continue to allow care recipients with an existing mortgage to (including those with a Lifetime Loan) to take out a Nursing Home Loan.