Lifetime loans explained

Raymundo LarraĆ­n Nesbitt, August, 3. 2020

Are you a senior citizen struggling with liquidity problems in Spain? Did you know there is a special legal procedure to free up equity from your home and easily obtain money from lenders? Solicitor Raymundo Larraín explains to us what a Lifetime Loan is and how you too can profit from its multiple benefits. Interested? Read on.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 17 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

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Article copyrighted © 2011, and 2020. Plagiarism will be criminally prosecuted.

Today’s article is dear to me, as it was the first one I published in Spanish Property Insight, under my own name, a decade ago. At the time, I was living and working in the United Kingdom.

Original article from the 21st February 2011

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of August 2020

Introduction

Back in 2006, I was one of the first lawyers in Spain to formally introduce Lifetime Loans (LTL, for short) from the hands of a New Zealander institutional lender. This is a very niche financial service that few lenders have on offer. Because it is a service aimed only at residents, unlike other lenders, they do not need to communicate or speak in English, much less in other languages. Which is where we come in.

In the aftermath of the Covid-19 pandemic, families continue to struggle to make ends meet and face their mortgage payments.

LTL is one of our proposed solutions to release equity from your home in Spain. This option appeals to senior expats resident in Spain. It offers them the opportunity to release cash from their homes whilst still being able to live in them for the remainder of their lives.

At a time when finance is tight (understatement), a LTL allows asset-rich but cash-poor senior borrowers to unlock the store of wealth they sit on without any impact to their lives. Well, other than being paid a substantial amount of money that is!

A LTL is a niche financial service. Please contact our company directly if you’re interested, and want to know more.

Definition

A Lifetime Loan is a special type of home equity loan for senior residents. It allows owners to release equity from their homes converting it into cash by placing a charge against their property (which acts as collateral). The loan does not have to be repaid during the homeowner’s lifetime.

Specifics

The borrower retains full ownership of the home and can actually continue living in it until they, or their surviving partner, passes away. Once this takes place, the loan (plus accrued interests) must be settled by either selling the property or else by the appointed heirs who will repay it in full. The loan can be taken either as lump sum or periodically in instalments at the borrower’s choice. The older you are, the larger the amount of money you can qualify for as it follows a sliding scale.

At no time will the borrower owe more than what the collateral (the house) is worth even if the resulting debt is higher. Meaning that at the time of passing away, it suffices to either hand over the property to the lender or else to pay to settle the debt for good. The afore has huge legal significance as it implies that, unlike a standard Spanish mortgage loan, with a Lifetime Loan you cannot be pursued for negative equity. In other words, the valuation of the property for the purpose of requesting this loan facility is the capped threshold you can expect to owe a lender on signing on the dotted line. This brings much relief to borrowers.

Who qualifies for a Lifetime Loan?

  1. Be resident in Spain.
  2. Be 65 years old, or over.
  3. The property must be your main home (not a holiday home).

How’s the loan paid?

  1. In lump sum, all in one go.
  2. In monthly instalments.
  3. A combination of the two above.

Payout chart

The following is a chart to give you an idea on what you can reasonably expect to be paid out. It follows a sliding scale, so the older you are, and the more your property is worth, the higher the payout. In the below chart I only show the payout either as a lump sum or in monthly instalments, but you could also choose a combination of the two if this accommodates you more.

Property value (€)

Age

               Payout (€)

    Lump sum          Monthly

200,000

65

           50,000                   200

200,000

80

           78,000                   600

 

 

 

500,000

65

         120,000                   500

500,000

80

          195,000                1,500

 

 

 

1,000,000

 65

          240,000                1,000

1,000,000

 80

          390,000                3,000

Pros

  • You get to decide how and when you want the loan paid out. You are in control.
  • The loan does not need to be repaid during your lifetime, only after you pass away. You have peace of mind.
  • You may continue to live in your home for the remainder of your lifetime unmolested. You are independent.
  • Attaining this loan does not impact your lifestyle in any way other than improving it. You deserve it.
  • You get to decide how and when to spend the loan, no strings attached. You have freedom.

 

Are there any restrictions on what can be done with the loan?

None. You are free to use the loan as you see fit. For example, some borrowers use it to pay for improvements on their homes, others to travel around the world, and others to finance expensive medical treatments.

In conclusion

One of the main drawbacks of living in a democracy is that retirement nowadays is akin to playing a rigged soccer match with the Government, in which it keeps moving the goalposts! It is foreseeable governments will jump at the chance to use the Covid-19 pandemic as a plausible excuse to push back retirement age by several years – again. Some people would rather play it safe and not take chances with their life savings on applying for a LTL. A LFTL gives you peace of mind and financial stability because no matter how choppy the waters are up ahead, you always get paid on time. It nicely supplements any pension cover you may already have affording you in your twilight years quality of life and choice.

A Lifetime Loan is a great option that can help you, and your partner, attain a tidy amount of extra income to help you push (very) comfortably past the finish line every month. Attaining a LTL does not change your lifestyle in any way, well, other than greatly improving it!

At LNA, we help clients to secure a LTL anywhere in Spain, discharge an existing mortgage liability, and sign it on your behalf at a notary for a very competitive fee. This is a very niche financial service that very few lenders have on offer, and we know them all. We have over 14 years’ experience signing them. Give us a buzz and find what the fuss is all about.

Larraín Nesbitt Abogados, small on fees, big on service.

Democracy is the worst form of Government except for all those other forms that have been tried from time to time.”Winston Churchill

Sir Winston Leonard Spencer-Churchill (1874 – 1965). Born into a privileged aristocratic family,  he was an eminent British career officer, artist, historian, delicious eccentric, and laureate writer – awarded the Nobel Prize in Literature in 1953 “for his mastery of historical and biographical description as well as for brilliant oratory in defending exalted human values.” With dogged single-minded determination, he defied alone and managed to stave off, the tyrannical Nazi wave in WWII, unwaveringly assisted by our American cousins, which threatened to swallow whole the United Kingdom as it had already overrun most of Europe. He resolutely led the country out of its darkest hour, restored Europe’s freedom, and laid the groundwork for peace and prosperity which all future generations have come to enjoy since and taken for granted, or so it would seem. As a keen-eyed historian, in line with fellow Founding Fathers Schuman and Monnet, he was quick to grasp and understand the importance of a united Europe to avoid repeat past mistakes which had resulted in two world wars that ravaged the continent. Consequently, he became a staunch defender of the idea of creating a single supranational political and economic entity which reconciled old foes and would act as a guarantor of peace & prosperity in the continent (in his own words, a “United States of Europe”); in time, this European fellowship would be known to us as the European Union. Churchill was instrumental, and the key driving force, behind the creation of the Council of Europe, a forerunner of what is now the European Union. He is credited as one of eleven Founding Fathers of the Union. Churchill incarnated like no other the best of British values. A child of the House of Commons, he was a proud servant of the State, never its master. A true statesman that would always put ahead of any consideration the best interests of our people, by tearing down divisive walls and fostering at every opportunity union.

Simply put, he’s likely the finest British politician ever to grace 10 Downing Street.

Larraín Nesbitt Lawyers is a law firm specialized in inheritance, conveyancing, taxation and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

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Article originally published at Spanish Property Insight: Lifetime Loans Explained

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

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