Irish clients taking full advantage of Equity Release options

Equity Release is not just a Spanish phenomenon, it is becoming increasingly popular in Ireland too.

Home PLus

Home Plus, an Irish equity release company is helping Irish Seniors to improve their cash flow options and some of them are even using the money to buy property in Spain! 

SPRY

Another lifetime loan provider called SPRY said that demand in Ireland is much greater for Equity release than they anticipated. 

SPRY has even cut its fixed interest rate amid better than expected loan volumes.

Seniors Money Mortgages

The Irish company, a retail division of Seniors Money Mortgages, resumed lending in January 2021.

They officially said it has handled thousands of enquiries in the past few months, meaning it is not only in Spain where seniors are freeing up the equity in their homes. 

Lifetime loans, a big industry in the UK, allows older homeowners to borrow against value in their property without the need to sell it. They don’t need to trade down, move or even make monthly repayments. Once clients get a good deal, the interest rate is fixed for life, depending on their age and the value of the house.

These companies are launching a home-reversion product for the first time in the Irish market since the financial crash. This is where older people can sell a stake or a share of their home in exchange for a lump sum. They also have the option of an annuity or monthly payment and a lifelong right of residence. In Spain, we call it an Usufruct

Residential Reversion

Residential Reversion was originally set up in the late 1990s and previously traded as Sixty Plus Finance. They, like all of us, had financial issues after the credit crunch and now have been taken on recently by chief executive Ian Higgins. 

Higgins previously worked on resolving difficult loans with Certus, said Home Plus has lined up €250 million of global pension money and wholesale funding.

Unlike equity-release loans, a product we don’t really like where the customer retains ownership of the home in exchange for a mortgage with rolled-up interest that must be settled by way of a sale after the death of the borrower, home reversion is different.

It involves the sale of a share in a home.

This stake, like in the UK, is usually for a much lower figure than its current market value.

Mr Higgins says the product is very popular with senior clients who are keen on resolving cases where homeowners are in arrears and maybe are in danger of going down the repossession and ultimately eviction route. Just like in Spain, a lump sum can be used to ease the homeowners’ debt issues. With all finance cleared, the borrower can relax, retaining the right to remain in the home and a minimum 5 per cent stake. It works differently in Spain, but very much based on the same principle. 

Ian Higgins; “Home Plus allows a homeowner in Ireland to solve their financial problems without relying on the state or selling their home”. They can of course afford to spend more time enjoying the sun in Spain!! 

Calculating the lump sum

The calculation is similar in the UK, Spain or Ireland. The lump-sum amount is arrived at through an actuarial calculation.

We’ve brokered a few equity release deals in Spain, taking into account the market value of the property in vacant possession, the expected house price inflation over the term of the deal and the life expectancy of the client.

A stake sale for homeowners opting for a lump sum would be lower than those who go for a monthly payment option, or annuity. 

That’s obvious because the lump sum is based on a so-called net present value. A discount is applied to take into account that an amount of money is typically worth more now than it will be in the future.

Based on Irish central bank data, there is more than €3 billion of mortgage debt in the State where borrowers are over 65 and at least three months in arrears. For a small population, that is a lot of debt. Equity release might be the answer for a growing issue that is coming down the road. 

That probably constitutes about 15,000 loan positions that need help, Ian Higgins has said.

Unlike Spain, Ireland has recently increased the tax investors pay on equity release deals.

Mr Higgins said “We are now being forced to incorporate a 10 per cent stamp charge into our underwriting. This will ultimately be a cost to the consumer¨.

The future of equity release

Over at Spry Finance, Dublin, the future looks good. The first six months of operations have been busier than expected and they already have a pipeline of almost €60 million in loan enquiries, the company officially announced. 

Director of Spry Finance John Moriarty, recently said the company had anticipated a level of pent up demand but wasn’t sure what to expect. Today’s clients also bring their own more sophisticated approach to the decision process, he says. 

Many property sellers are being referred to Spry by their accountant or professional financial advisor. Why are professionals in Spain reluctant to do the same we wonder? 

Do they still not understand the process and the advantages to the property owner? 

The family home, whether in Ireland or in Spain, remains the single biggest asset most of this age group have.

There is a general awareness that a Lifetime Loan or any form of equity release enables them to release some of the value tied up in it.

Perhaps considering the lessons of the financial crisis, clients are nervous but lack some clear direction by independent advisors who have the best interest of the property owner at heart. 

Research conducted by market research agency Behaviour & Attitudes on behalf of Spry Finance indicated that over 60s wanted to remain in their own homes and do not want to have to move.

They wish to keep the same property, the same neighbours and intangibles like the memories they have in the property.

The younger generation wants to see their parents having a better quality of life for the healthy years they have left. 

EQUITY RELEASE ADVANTAGES

The money freed up in Equity release deals can be used for a range of purposes, including home improvements to make houses more comfortable, holidays, paying off a mortgage balance or other debts to free up monthly cash flow, and lifestyle expenses.

A recent client of ours used the equity release to modify the property for a spouse who, although healthy in general, had a recent stroke and needed a downstairs bathroom but wanted to stay in their Alicante home. 

“Feedback from applicants in 2021 would suggest that this age cohort has little interest in down-sizing for various reasons. (costs of downsizing in Spain are high) They strongly prefer to ‘Age in Place’ preferably in comfort, with less debt, hence the decision to apply for the loan,” Mr Moriarty said.

The more common equity release becomes and the more usual it is in Ireland, the more Irish clients we think we will have in Spain looking for a cash flow solution.

If you own a property in Spain, and you need equity release, we are currently the market leaders. 

Please feel free to talk to us for a free quote.

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