Equity release is a term that results in very different emotions.
Most of our investors, collaborators and property owners really appreciate JJC Capital Partners and understand being the first (and currently only) English speaking Equity Release firm covering the whole of Spain is not easy. We follow the rules in Spain to the letter of the law.
We have hundreds of very happy clients. These are people who own a property in Spain and needed cash for a variety of reasons.
- One of our clients absolutely would never have seen her new grandchildren in Australia without the cash injection. She took equity release with the full support of her two sons.
- We had a client needing 300,000 euro to get out of the bankruptcy he found himself in back in Scotland.
- We had an Irish client aged just 55 who needed a sale and leaseback deal to support his life in Spain until such time as he is eligible to get his state pension.
These people are our ambassadors who tell many friends and neighbours how well it works.
What about the clients who have less successful experiences?
We recently posted a poll on Facebook asking our followers to vote on what their opinion is of equity release. The split between “yes, Equity Release is great” and “no way, it must be a scam” were around 50/50.
Why, we wonder, is there such a disparity in attitude towards equity release in Spain?
What is Equity Release in Spain?
Just like in the UK, Spanish equity release is a way for a homeowner, generally aged over 55, to release a portion of the value of their home equity. The rules are different in Spain and maybe that confuses our clients and Facebook commentators.
People don’t quite get it and the comment “it’s too good to be true” is seen very often in our social media channels.
Generally, in many cases, there are no capital or interest repayments to make until the property is sold or the deal matures.
Equity release in Spain is growing in popularity due to the lack of options from the high street banks. The plan enables Spanish property owners, who live in Spain or the UK, to take advantage of the equity in their house without having to leave their homes
So, Equity Release in Spain is not a scam?
Just like in the UK, here in Spain, there is a lot of oversight and compliance processes to adhere to in relation to equity release.
Our sister company and legal wing, Spanish Solutions presented us a case back in 2018. They had a client, a family in fact who had recently suffered the loss of their grandad in Spain.
The family had no idea that Grandad had taken out an Equity Release deal in 2007 without receiving legal advice.
His home was worth 150,000 but, he owed the company (who have since been closed) 195,000 euros. They wanted a court case to commence against them, but with no chance to win in court, the family felt devastated. It was ten years too late for them to talk to us.
In Spain, equity release is only available to older homeowners and involves giving up a portion of the value of their homes. Naturally, some family members may consider equity release to be a “scam” as it affects the amount of inheritance they may receive.
These family members do not leave us good reviews on social media, and it’s understandable although JJC Capital didn’t even exist when their relatives took out their reversion mortgage or some sort of home equity in Spain.
As with our client above, many people in this older generation have different attitudes toward the discussion of money problems. We always encourage them to speak to family members as well as their trusted law office.
News of the equity release may only come to light after a family member has passed away. Inheritance does funny things to people, not least when it may be significantly less than someone expected to receive, and that maybe is when they turn to Facebook to express their frustrations.
Always speak to your family before taking out Equity Release.
Maybe a family member can loan you the money? We can structure a deal whereby a family member buys your home now and gives you a lifetime lease.
Again, please don’t attempt without speaking to us or another creditable Equity Release firm.
Costs of Equity Release in Spain
One way a Facebook “friend” of ours described equity as a scam is that often the equity release product or loan is subject to a higher than the average interest rate.
We mentioned an Irish client of ours above. He spoke to his local credit union in North Dublin, and they offered him a deal.
- He was going to borrow 100,000 there (using his son’s family home as a warranty). I advised him to check the details and he was stunned.
- The set-up fee was 3,500 euros. It gets worse though.
- The interest rate, in this “local, family-friendly” bank is 6%.
James would ultimately end up paying this;
Repayments; 924 p.m.
This means; 10,000 in principle repaid, plus 44,256.86 plus 3,500 set up.
The total cost of borrowing 100,000 Euro in The Irish Credit union; 47,756.86€
Needless to say, once we explained the real cost of borrowing in Ireland, or through a Spanish bank, he went for an Equity Release option in Spain.
Banks are expensive. Loans are expensive. That is the way things are. Technically this isn’t a scam or fraud by the banks, but they need to make a profit.
Their shareholders demand high profits. And sure, it could be considered a rip-off. Inevitably, there are financial companies looking to take advantage of people with a loan that isn’t good value. Some lending institutions in the UK charge up to 25% interest.
If it is the only option for the client, they have to sign up.
People accuse Equity Release firms of being expensive when often, compared to a bank, the deal is much more appealing.
Make sure you understand the costs of the loan spread over the full lifetime of the deal
Also, don’t necessarily assume the Spanish high street banks have your best interests at heart.
Remember that they have other priorities, not just helping you financially.
Can fraudsters use equity release as a scam?
Deep down, most clients who enquire, know that equity release in Spain is a perfectly legal tool. It’s a great option for many older homeowners.
Our ex-pat clients in Spain use equity release to clear expensive credit card or personal debt, help other members of the family pay for a wedding or education or just supplement their income.
There are of course always people out there looking to take full advantage of the trusting nature of others. In Spain, identity theft is one of the most common methods of fraud.
A real scammer can and will typically set up a genuine-looking advert on Google or Facebook. You can understand why our commentators accuse us of being this type of scam.
Often, you’ll see a fancy equity release calculator. Here, the homeowner has to provide their personal details in return for a personalised equity release quotation. Bad idea!
This data collection process is the basis for identity theft. The forms will sometimes require far too much personal information, without raising suspicion to the untrained eye.
Clients who think it’s legit, often offer enough information, for the fraudsters to apply for loans on the homeowner’s behalf.
These scammers can often sell the personal details onto unscrupulous marketing agencies. These firms will then bombard homeowners with further high-pressure sales calls, spam calls, hoping they will sign up to high-risk investments, crypto schemes etc.
The homeowner is a qualified target because they have already told the scam artist, they have financial assets and need extra money.
Never enter into any sort of communication with a firm that looks too good to be true
Tell them that they need to contact your lawyer to get the required information.
That will usually be enough to halt their charge at you.
Always speak to a law firm before agreeing to anything. Please remember that if it looks too good to be true, it probably is.
I’m giving away my Spanish house for free.
Another way to ask… How much does equity release in Spain really cost?
The average interest rate on a lifetime mortgage in the UK is currently around 4%. Bank rates are the lowest they have been for several years, but that looks set to change going into 2022.
Either way, just because a deal has a low-interest rate, this doesn’t always mean it’s the best deal.
For the sake of argument, a client with a 100,000-euro home in Spain, can get 50% of the value, so 50,000 in exchange for the rights to live there forever.
Let’s assume they live for 20 years and pay no rent. That is a saving of for example 500-euro x 12 x 20 years. 120,000 euro.
Also, if you invest even half of the money at 5% compound interest, by the time the 20 years matures, it’ll be worth 68,000 euro. Nobody is giving away their house for free!
We are not unbiased financial advisors but many of those who take out Equity Release with our company end up investing some of the capital with us. It is a safe, high return option for our property owners.
Downgrading to release capital. Let’s say a client rather than going for equity release decides to downgrade his 100,000-euro property.
First, it will take time; second, he needs to deal with estate agents and their often-unfair demands; He also needs to pay their fees, typically 7.5%; he needs to pay a lawyer, notary, land registry etc, maybe even cancel a mortgage.
To be conservative, he’ll have 90,000 after his deal, if he gets lucky. Next, he must take out some of the many, say half, as his equity release pot.
He now has 45,000 to invest in a downgrade property, however, he has even more cots in this situation. If he is lucky, the ex-homeowner will have 35,000 to invest in a new property.
You’re not going to get much property in Spain for that sort of investment. Suddenly Equity Release looks like great value for money.
Borrowing back in Britain
With certain UK equity release schemes, a client may for example borrow £20,000 aged 60.
They pay interest of 5.1% on a £120,000 home. Without realising, the amount they owe doubles roughly every 14 years. Hopefully, the clients will live until 74 when they will owe around £40,000. If they live until 88 they owe £80,000. All on a 20k loan.
Again, you can see why we think our Equity Release model offers superb value for money. All we have to do is compare it to the alternatives.
Ask your equity release provider for a written breakdown of costs
5% compound interest gets expensive quickly. Often, you’ll have to pay a number of fees too.
This can set you back between £1,500 and £3,000 in the UK. You need to get the fees for various options and compare them diligently.
How to avoid falling for an equity release scam?
To avoid falling victim to an Equity Release scam, there are a number of fixes as mentioned, above.
It is important to carefully consider the sites you choose to input your personal information on. Not happy to provide information over the internet? Arrange a personal meeting. Still not sure who JJC Capital partners really are? Ask us for testimonials. Still not convinced. Insist on speaking to our tax advisor, assessor, lawyer, investors. We’re real and you need to work with real people and real businesses.
Don’t be too free to give away your personal information. If you are only taking tentative steps to see how much money you could raise from your Spanish home, just try out our ER calculator. It doesn’t require any personal information at all. One of the team members built one from scratch that gives you the result straight away, no contact details are required. Why would we need your bank or Credit card details anyway?
Check who we work with;
- The bank of Spain
- the Spanish association of public notaries
- Sabadell bank
- 347 assessors
These are reputable firms who are not putting their reputations on the line to protect us unless they too believe in us.
Involve responsible family members or trusted friends to get that second opinion whenever possible.
Be careful of free advice though, we know what it is worth.
An 82-year-old client of ours, well almost client, was talked out of a perfect deal by a neighbour last spring. The reason is that we think he has hopes of inheriting the home after her days.
He was one of our Facebook friends, telling us it was all a scam. Be careful where you get your advice.
She is now sitting in her Quesada home, with no money, no visa to remain here in Spain, (we were getting her non-lucrative visa for her) no health cover and all because of bad advice.
Had she spoken to a family member surely, they would have told her to go for it, especially with the guarantees we can provide.
- Ensure you get a couple of quotations and options to make sure you are getting the best value.
- Maybe rather than take equity release in Spain, you may get a better deal back in the UK? Maybe you can rent a room in your house? Maybe a family member can lend you some money?
- Do explore other options, including the Spanish high street banks.
We always advise clients to take some time to think before signing an Equity Release agreement. You should not feel like we are putting you under any pressure.
This is a big decision, take your time. Once you decide to do it, go for it and start enjoying the third life in Spain!
- This blog post/article offers information about financial planning. We are not financial advisors. Therefore, the details here should not be taken as personalised advice.
- Equity Release in Spain will reduce the value of your estate. Please always seek professional legal advice here in Spain.
Our advice if you are still unsure whether Equity Release in Spain is a scam or some sort of Ponzi scheme is to get the facts from us, compare the alternatives, ask a lawyer and once it all adds up, only then make your decision.
We’re always available to call you to discuss it. We cannot vouch for other legal firms in Spain offering Equity release, but we guarantee you that JJC Capital Partners is not a scam!
We look forward to proving it to you too!