How does Equity Release in Spain actually work?

Equity release is a new concept in Spain. The high street banks do not get involved and as far as we can see, we are literally the only financial firm in Spain who is handling the process all over the country. We are certainly the only English speaking company currently licenced and active in the market.

So how does it work?

The process is not like it is back home. It is the same principle but some very different steps and strategies. Below we try to explain a few of the key points.

How long will my equity release take? 

We are privileged to live in Spain with all that it entails. We do know however that part of Spanish culture is the presence of bottlenecks with most processes. Equity release is not any different.  

The equity release process usually takes from 10- 16 weeks, though at JJC Capital Partners, we have cases where the whole process has been completed in just 18 days! In other cases, we start the payments to the vendor (the person looking to release capital) even before the deal is signed in the notary. 

Timescales are dependent upon a number of factors: 

  • The efficiency of your lawyer.
  • Your asking price.
  • The location and type of property.  
  • Further complications such as a divorce with two arguing parties on the deeds. 
  • Whether or not there is a bank involved.
  • The legal status of the borrower; Do you need a visa due to Brexit? If so, we must do this first. 

At JJC Capital Partners, you’ll be given a case management team. These professionals are experts in co-ordinating all the parties involved, banks, notaries, investors etc, to make the process as fast and as seamless as possible.

First Steps

You need to get in touch with JJC to start the ball rolling. Don’t worry, there is no hard sell. You’ll be speaking to someone in your own language (We speak English, Spanish, German, French, Russian etc). You explain your situation and we give you some general information and usually an if/then response to your verbal application. “If your home is as nice as you describe, then we should be able to offer you XYZ”. 

We ask you questions such as whether or not the property has a mortgage, if everything is properly registered since the time you purchased it etc. You get an idea of the types of offers you can expect and you go away to think about it. Let’s assume you have a positive feeling and wish to move forward. 

At this stage, we start to get more specific 

We need details on your property; We’d like a copy of the deeds or nota simple. 

We check the land registry to ensure that all debts have been cleared, the names on the application match those of the deeds etc.

If there are any surprises for you, this is the time to find out. What if your pool is not legal or the property is not what you thought you had bought? What if you assumed that your mortgage had been cancelled but it was not? What if your ex partner has a lien on the home?

All of this will emerge at this time.

Does my house have to be valued?

Yes, very much. On completion of the basic application form, it is submitted to the equity release team to complete a basic valuation of the property. The role of this surveyor’s report is so that JJC will have information on the current market value based on a relatively quick sale.

Many of our sellers who paid an inflated price during boom times in Spain are surprised at what the property is actually worth. Others get a positive surprise when the valuation comes back higher than they expected. 

The surveyor will assess the local proximity to the property and establish similar properties and the price they have sold for within the last few months. Just because you bought for 250,000 in 2008, doesn’t mean it is worth that now. The surveyor firm will ascertain whether any essential repairs will be needed to be carried out should the property have material defects. 

The role of a good solicitor

The actual amount of time your equity release process takes, greatly depends on how efficient and experienced your solicitor is. This is not a normal deal for them.

Many law offices in Spain have never done a deal like this. It gets more difficult in non straightforward cases. Maybe you need a non-lucrative visa? Again, the majority of law offices simply don’t know how. This can delay us long enough that any potential investor assumes there is a problem with the property.

We work with a few firms who know Equity Release inside out. These teams are representing YOU and ensure that you are getting the most accurate and up to date legal and taxation information.

 

At the same time as the application is submitted, it is wise for the legal process to get underway for speed of completion. Even if you decide not to go ahead, you still need your pool to be made legal, your non-resident tax bill to be cleared, the debt removed from the deeds and your Spanish will to be sorted out.

Unless a client specifically requests to use their own firm, (in some cases we can tell sellers in advance that it won’t work with a particular lawyer who doesn’t understand equity release) we recommend an experienced equity release solicitor.

Additionally, these solicitors will provide a ‘no completion, no fee’ agreement with our clients. You’ll pay for the services you actually complete. Typically the process, assuming all paperwork is on order is 1,000 – 1,500 euro.  There are many benefits of using our recommended law offices, such as speed and the quality of communication.

When do I get an offer? 

Early in the process, and very often when you are doing your initial fact finding we can give you a written offer. This might state, for example, that we hope to get you 100,000 euro for your property in exchange for a lifetime usufruct. (Basically the legal right to live in the house, rent free for life).

You might decide not to go ahead and there is no harm done and no hard feelings. (importantly, no costs to the seller either!)

You can negotiate a little, you might say you need 110,000 and ultimately we put the property on the market for 105,000. It is important that your lawyers look over the contract as there are a few clauses of interest in it. A good example is that you can’t deal with us and later decide to sell to another Equity release firm.

Your commission will be included here; Typically 4 – 5% selling fees.

Your law office will give you a full breakdown, stating almost to the euro what you take home after fees, commissions, bank fees and everything else is taken into consideration.

What do the offers look like? 

Not all offers are the same, as not all property owners are the same. Let’s say that you only want Equity Release in order to get your non lucrative visa and secure your future in spain.

Strictly speaking you only need 27,000 euro today and the same in a year. You might spread out your lump sums like this: today 35,000 euro: month 13, 35,000 euro: month 24 30,000 euro. 

Other clients insist on a lump sum of the full amount. It is all up to the individual.
A third cohort prefers a sort of annuity payment. Maybe you just need 10,000 now, plus 1,000 per month for the next 90 months. You decide and the notary will script the deal to match this, when we arrive at that stage.

Perhaps you can offer all three types of deal to investors, and whichever comes first, you will accept. Please remember, investors prefer terms to price. 

Assuming you’re happy, you sign the document and one of two things happen.

The sale

In order to maximise the profitability of your property, we offer all our listings on the general market and to our database of investors. This might involve an investor offering you slightly less than the asking price. (Generally in this sort of deal, you will not have to deal with silly offers).

You might weigh it up, and decide a 3,000 euro discount for a lump sum as opposed to annuity payments is worth it. 

We also buy a lot of properties directly through our own fund. This has benefits to you, (speed, efficiency etc). We need to ensure a profit for our investors and work hard to find the perfect sweet spot that makes both our sellers and investors feel that they are winning! 

What are the timescales to get money in my bank account?

An equity release application usually takes a few weeks to just get the checks, paperwork, photography etc done, assuming the title on the house is clear. We go to work getting you the right investor as early as we can.

 We publicise your property on as many of the major European property and investment portals as we can. 

We deal with investor enquiries and present you with the offers. Once you are happy, we inform the buyer and it’s back to the law office. 

What’s involved in conveyancing for equity release?

A few paragraphs ago, we said that the process would have started already before we even mention conveyancing. We now have the signed contract, the deposit paid by the buyer and a completion date.

Should any existing mortgages or secured loans be present on the title deeds then they must be removed upon completion. The investor is not going to cover your loan, unless that is part of the arrangement. 

The mortgage will usually be settled by the proceeds from the deal. The solicitor will be to establish exactly how much will be required on the proposed completion date; there is IVA tax to pay, perhaps an outstanding community fee, etc.

We book to go to the notary on a date that suits everyone. This as well as being a legal requirement is a great safety net for our buyers and sellers. The public notary will point out any discrepancies on the deeds, before they become an issue. 

The usufruct clause is quite simple really for lawyers who are experienced and know what to ask the notary to prepare. On signing you’ll receive a check, or in reality, a bank transfer and that is that. 

Our most common equity release deal states that you are living in the property for life with certain obligations. You’ll be responsible to maintain the property to the same standard it’s currently at. The buyer will cover the insurance for the building, while you cover insurance for the contents. These are small matters to be discussed and it is all dealt with in a smooth efficient fashion by the team. 

For our British clients who are hoping to legally retire to Spain, the next few months will be busy with everything from police reports to credit checks, medical reports to in-person meetings in the local embassy. Your Non lucrative visa can hopefully lead to full Spanish citizenship in around ten years. Again, having just one law office dealing with your file speeds it up and as quickly as we can we help you to get your visa, we will do so. 

Other expenses

The last bit of housekeeping involves us making sure you don’t pay too much in fees and costs.

Let’s look at bank fees. Some Spanish banks will charge up to 1% to cash your check but a transfer is free!

Health insurance costs can vary; we give you the benefit of our expertise and make sure you get the maximum cover for the least cost.

Perhaps you are taking equity release to get refurbishments done around the property, we have a list of professionals who will help.

We don’t want you to pay too much if you are transferring the money from Euro to Sterling. As you can imagine, we have a number of currency companies to choose from.
We have, in fact, everything covered for you.

Last thing

The only thing remaining is for you to finally relax and enjoy your time in Spain.

Still trying to decide? Ask yourself, if you don’t do it now, then when will you do it? 

Contact JJC Capital Partners for more information.

3 Comments

  1. David Martin

    You do not mention what happens to any repairs, even small things that go wrong from time to time, that may occur during the time you live in the house rent free. Who pays for the repair work? Over say a 10 year period it is quite possible that a repair will be needed that was not noticed or foreseen at the time of the sale.

    Looking forwards to hearing from you Regards David

    Reply
    • JJC Capital Partners

      Dear David,
      Thank you for your enquiry regarding Equity Release in Spain. As a general rule, the “tenant” covers basic repairs. For example a crack in the window, pool maintenance, the painting of the garden fence, whatever it may be, the responsibility is with the person in the house. If however there is a serious issue, like the roof starts to leak, then that is the responsibility of the investor. Mostly we discuss all these issues with both parties before we sign anything.
      If you’d like a brief chat to discuss we are always willing to do so.
      Best wishes!

      Reply
  2. JOHN ROHAN

    DO YOU MAKE EQUITY RELEASE ( REVERSE MORTGAGE ) LOANS ON HOMES IN MARBELLA THAT ARE OWNED BY A COMPANY ?

    JOHN ROHAN

    Reply

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