Average life expectancy in Ireland is now almost 83. That’s an increase of more than six years since the turn of the century. We’re living longer than ever – and generally in better health too – so, it’s little wonder that many of us look towards retirement as being our ‘golden years’.
Later life should be a time to savour experiences, fulfil dreams and tick off items on the bucket list. But funding a comfortable retirement isn’t easy, even after a lifetime of hard work. It is not unusual for people to end up asset rich but cash poor in retirement, with much of their wealth tied up in their home and limited options to access credit, while they live on a reduced income and insufficient savings.
Behaviour & Attitudes research from Spry Finance found that 4 in 10 homeowners aged over 60 are having to make significant cutbacks to manage their household finances – with just 17% stating they were ‘very comfortable’ financially.
Some homeowners choose to downsize to a cheaper home as a way to help fund their retirement – something that 22% of survey respondents said they would consider – while renting out a room in your home is another way to boost your income.
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However, an increasingly popular way to raise money is to use a Lifetime Loan to convert some of the equity contained in your home into a cash lump sum.
Over the past two years, more than 1,000 people in Ireland have taken out a Lifetime Loan with Spry Finance – choosing to borrow against the value of their home but without having to move out or make regular loan repayments.
They use this money for a variety of purposes, such as paying off an existing mortgage or other debt, upgrading their home to make it more comfortable and energy efficient, gifting money to family members, funding specific medical needs, spending on a new car or holiday, or simply boosting their savings.
Lifetime Loans are not suitable for everyone, but they are a valuable financial tool for the over-60s, so here are the key things you need to know about them when considering whether they are a good fit for your needs.
What is a Lifetime Loan?
A Lifetime Loan is a form of equity release mortgage which allows a homeowner aged over 60 to borrow, at a fixed interest rate, against the value they have built up in their property without the need to sell it, trade down, move out, or make regular repayments.
Instead, interest is added to the loan balance, which grows over time, and the loan is not repayable until after the borrower dies or moves out of the property. With a Lifetime Loan, the borrower retains 100% ownership of their home.
There are two types of Lifetime Loan available from Spry Finance – the Standard Lifetime Loan and the Green Lifetime Loan. The Green Lifetime Loan is designed for people who have an energy efficient home or who are willing to invest in attaining one. It comes with a reduced interest rate and is subject to certain qualifications.
Who is eligible for a Lifetime Loan?
Lifetime Loans are available to people over the age of 60 who own their own home. The loan can only be secured against a permanent residence located in Ireland and worth at least €250,000 in Dublin, or €175,000 elsewhere. The borrower must be the registered owner of the property.
How much can be borrowed?
The maximum amount someone can borrow depends on their age when the loan is agreed and the value of their property. This starts at 15% of the property value at age 60 and rises 1% per year up to 40% for those 85 and older. The minimum Lifetime Loan amount is €20,000, and the maximum is €500,000 irrespective of a borrower’s age and the value of their property.
What can I spend a Lifetime Loan on?
Lifetime Loans are designed to help meet your financial needs throughout retirement – whatever they may be – so borrowers are free to spend the money as they wish. The top reasons given by over-60s who apply for a Lifetime Loan are:
· Cash fund to maintain lifestyle or for a ‘rainy day’
· Home improvements
· Cars and holidays
· Paying-off existing loan or other debt
· Gifts to family and friends
What key benefits are there to a Lifetime Loan?
Unlocking the value of your home, while retaining ownership and without having to move out of it, is the primary benefit of a Lifetime Loan. Not having to make regular repayments means that cash is freed up to be spent elsewhere, particularly if the loan is used to pay off existing debt.
The fixed interest rate provides certainty about how the loan will grow. However, there is also flexibility – and borrowers can choose to reduce their loan balance by making optional repayments of up to 10% of their original loan amount each year without incurring a penalty.
The loan only becomes repayable if you sell your home, move from your home into long-term care, or pass away.
Another important feature of these loans is that they come with a No Negative Equity Guarantee. This means that you can never owe more than the value of your home and so neither you, nor your estate will ever have to repay more than the net sale proceeds of the property even if the loan balance exceeds this amount.
What about the small print?
The main thing to know is that if you choose not to make monthly repayments then interest accrues on the loan over time. This is called compound interest and increases the loan balance until it is repaid. The future value of your equity in your home will be less than if you never took out the Lifetime Loan.
Why Spry Finance?
Launched in 2021, Spry Finance is 100% Irish owned and headquartered in Dublin. It is part of a company, Seniors Money (Mortgages) Ireland DAC, which is regulated by the Central Bank of Ireland, and has provided loans to thousands of Irish residents over the age of 60 since 2006, to help them meet their financial needs in retirement.
The role of Spry Finance is to guide you through your Lifetime Loan assessment, ensuring that you are armed with all the information necessary to decide whether or not it is the right solution for your circumstances. If it is, Spry will assist you in preparing your application for a Lifetime Loan from their lending division, Seniors Money.
Applicants for a Lifetime Loan must seek independent legal advice, and Spry Finance recommends that they also seek independent financial advice and speak to family members before proceeding with a loan application.
Spry Finance believes everyone deserves a greater life in later life and is dedicated to helping provide financial security to people over 60. Visit www.spryfinance.ie or call us on 01 5822 580 to find out how a Lifetime Loan can benefit you.