How much will be left?
When the loan is eventually repaid the value of equity remaining for the borrower or their estate depends on two things:
- What the house is worth then (which is driven by changes in house prices between now and then) and
- What the loan has grown to (which is driven by the loan’s interest rate throughout the life of the loan).
Time is therefore a key factor: The longer the loan lasts the greater it will have grown to.
- The loan will definitely grow over time. The reason this happens is that, unlike with a standard mortgage, you do not have to pay back monthly amounts of interest and principal. Instead the unpaid interest is added to your Lifetime Loan each month and incurs compound interest.
- The house value may or may not grow over time. The future equity remaining in your home may be more or less than you expect at present, and depends on what happens with house prices and how long the loan lasts before it is repaid. Equity means the value of your house less the amount you owe on it in relation to a mortgage. This may be less in the future if the value of your house, even if house prices increase, does not increase enough to offset the increased amount of your Lifetime Loan.
Because the interest rate is fixed, it is possible to calculate what the loan balance will be at any future point in time.
However it is not possible to know in advance what the future house value will be, because future changes in house prices are unknown.
Example for illustrative purposes only.
The illustrative figures in the example below assume a loan start date of the 1 Sept 2022.
|Age of Younger Applicant: 65||Maximum Loan Amount: €80,000|
|Estimated Property Value: €400,000||Requested Loan Amount: €75,000|
|Assumed House Growth Rate: 2.0% avg. p.a.||Setup Fee: €1,500, deducted from loan proceeds|
|Fixed Interest Rate: 5.95% p.a.||Net Loan Proceeds: €73,500|
|Age||Years||Loan Balance||Estimated Property Value||Equity Remaining|
Note: For illustrative purposes, interest on the loan is calculated at a fixed rate of 5.95% per annum and compounded monthly. Your Annual Percentage Rate (APR) will be calculated and provided to you during the application process.
Spry will provide your own customised calculations as part of the consultation process. In the meantime you can use our Lifetime Loan Calculator to run as many scenarios as you like, using various loan amounts and house price growth assumptions.
To qualify for a Lifetime Loan you (or the younger borrower if there are two) must be at least 60 years of age. The property must be of standard construction, located in the Republic of Ireland and be worth at least €250,000 if in Dublin or €175,000 if elsewhere.