More than 1,500 senior citizens borrow €70.5m through B o I's Life Loan


More than 1,500 people aged 65 and over have released the value of the equity in their homes through Bank of Ireland's Life Loan since it was introduced two years ago, according to figures released by the bank last week.

With the average loan standing at €47,000, this means Irish pensioners have borrowed approximately €70.5 million through the product.

Life Loan is different from typical equity release products because no repayments have to be made until the property is sold, the owner vacates the property or the owner dies.

Most of the loans are used for home improvements, to give financial support to family members, to buy holiday homes or just to boost quality of life.

Customers can borrow up to a certain percentage of the value of their home, depending on their age. If you are aged between 65 and 69, you can borrow up to 20 per cent of the current value of your home.

The maximum amount that can be borrowed is 30 per cent of the value of the home, but this only applies to people over the age of 80. The minimum property value against which the bank will issue this loan is €150,000 for a property in Dublin city and county and €75,000 to €100,000 outside of Dublin.

More than 65 per cent of Life Loan applicants live in Dublin, where house prices have been at their most dramatic.

According to Ms Olive Moran, marketing manager for Bank of Ireland Mortgages, Life Loan enables people to raise finance without having to trade down or move home, which for many, she says, would mean breaking social ties that have been built up over decades.

Some may also consider using this type of equity release to supplement their pension.

According to Bank of Ireland, 10 per cent of Life Loan customers are single, 40 per cent are widowed and 50 per cent married.

Both people named on the mortgage would have to pass away before the bank starts to recoup its investment, assures Ms Moran, so there would be no immediate pressure on the surviving partner. But both people would have to be over 65 to qualify for the loan.

Life Loan customers borrow at a fixed rate of 6.7 per cent for the first 15 years. At the end of this period customers are offered a choice of either a new fixed rate or a variable rate. Normally, equity release loans are paid back at home loan rates below 5 per cent.

After 15 years, with no repayments having been made, the initial loan will have grown considerably. So ideally Life Loan is designed for people who know that the size of the estate they leave in their will does not really matter too much to any future generation.

One Life Loan customer, a widower based in Galway, said he had thought "long and carefully" before taking out the loan last year. He used the equity release loan to pay off other debts and improve his standard of living, but also to renovate his house, putting in new carpets and floors.

"The house will have appreciated in value through the money I've borrowed," he says.

"So when I die, my children will get the same amount that they would have got. But my gut feeling is that they will buy the house between them and just pay off the Bank of Ireland mortgage."