Our retirement years can be a time to do the things that perhaps were put on hold or would make our later years more comfortable, like home improvements. If you don’t have the finance to do these things, aren’t eligible for standard loans, don’t want to borrow from your children or sell the place you call home, an alternative worth considering is a Lifetime Loan
Lifetime Loans are not for everybody but the recently launched Spry Finance has been set up to provide information on the product and expert guidance on whether or not a Lifetime Loan is a suitable solution in your particular circumstances. Spry Finance is the retail division of the Seniors Money group and the loan itself would be provided by Seniors Money.
What is a Lifetime Loan?
Very comprehensive information is provided at www.spryfinance.ie but, in a nutshell, a Lifetime Loan is a mortgage loan secured against your home and designed to last the rest of your life. There are no regular repayments to be made and the loan only becomes repayable after you pass away, cease to reside in your home, or sell it.
Lifetime Loans are available to residents of the Republic of Ireland aged 60 or over who own their own home. If there are two of you, the younger person must be aged 60 or over. Your home must be of standard construction and worth a certain minimum amount.
Pros and cons
The key benefit of a Lifetime Loan is that it gives you access to the value of your home without having to move out of it. Because no monthly repayments are required, you don’t have to have a certain minimum income to qualify. The interest rate is fixed for life, so you have certainty about what the loan balance will grow to over time. A ‘no negative equity guarantee’ is included which means you will never owe more than the value of your home.
On the flip-side the most important thing to understand is that, because you are not making any repayments along the way, interest is added to your loan (compound interest) which means the loan balance grows in size until it is repaid. The future value of your equity in your home, available for you or for your inheritors, will be less than if you never took out a Lifetime Loan.
What can a Lifetime Loan be used for?
Lifetime Loans can be used as you wish, and according to Spry Finance most people use their Lifetime Loan for more than one purpose. Typical uses include home improvements, purchases for the home, paying off a mortgage balance to free up monthly cash flow, and reasonable lifestyle expenses.
Spry Finance provided the following examples of real loans that have been taken out in recent months (names have been withheld to protect client privacy):
- Mr and Mrs R are married couple in their sixties with a house valued at €1,000,000. They borrowed €150,000 to provide a helping hand to their son to get on the property ladder as a form of ‘early inheritance’. This was openly discussed with the family and all siblings were included in the decision and supportive of it.
- Mr T is a single man in his late sixties with no immediate family, a house worth €310,000 but in need of repair, no savings and a small debt he wished to clear. He borrowed €60,000 to rewire the house, replace the windows and update the kitchen and bathroom. He also repaid the small debt, which freed up monthly income going forward.
- Mr & Mrs are a married couple in their early seventies with a house worth €750,000. They had previous positive experience of a Lifetime Loan, having taken one out with Seniors Money which they went on to repay several years ago. They returned for a new loan of €100,000, largely to refinance a property-related debt with the balance used for a combination of purposes including home improvements.
- and Mrs. Mc are a married couple in their sixties with a house worth €300,000. They are in the process of borrowing €65,000 to carry out home improvements to make their house more efficient.
Reinvesting the loan in the home, via home improvements, is the most popular use but other uses that Spry Finance clients put their Lifetime Loans to include refinancing interest-only mortgages on their homes or holiday homes, assisting family members with medical or other expenses, and small levels of lifestyle expenditure such as replacing their car or once-off foreign travel to see grandchildren in the likes of Australia or America.
Consultation process
Seniors Money, regulated by the Central Bank of Ireland, has over 15 years of experience in offering Lifetime Loans in Ireland, Australia, New Zealand, Spain and Canada. It is currently the only lender in Ireland offering Lifetime Loans, and all applicants are first required to undergo a consultation process with its retail division, Spry Finance.
The consultation process is designed to ensure that potential borrowers are fully familiar with what a Lifetime Loan is, how it works and the potential downsides as well as the benefits. Crucially, it also establishes what the borrowers’ circumstances are and whether or not a Lifetime Loan is a suitable solution for their financial needs.
