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EQUITY RELEASE on your property IN SPAIN...why you SHOULDN'T do it | Blacktower Financial Management
Oct 29, 2024
Equity Release on your property in now available in Spain, but should you take it out? Watch this before you even consider such a move.
Christina Brady from @blacktowerfinancialmanagem7049 has now moved to afternoons with Kal and was here in person with an update on the markets, inflation and the banks, but also with some very useful advice for anyone considering releasing equity from a Spanish property that they have paid off.
It sounds ideal but what are the pitfalls?
For any enquiries contact info@blacktowerfm FAO Christina or get in touch through the website: www.blacktowerfm.com
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0:00
Christina Brady with us from Blacktown
0:02
financial management so homeowners in
0:04
Spain can now release Equity from their
0:06
Spanish property if the mortgage has
0:08
been mostly or fully paid off off yes
0:11
it's the same in the UK I think what
0:13
people don't realize is equity release
0:15
is just taking out a lifetime mortgage
0:17
on your property and in the UK it's
0:20
available to over 55s and and what
0:23
you've got to do is you've either got to
0:25
when you take your Equity you've either
0:26
got to if you've got an existing
0:28
mortgage you've got to pay that off
0:31
or else you can't have it and so in
0:33
Spain really it's got to be debt free to
0:36
get Equity release now the one problem
0:37
with Equity releases say what's the
0:39
catch the one problem is and this
0:42
happened before I remember I think they
0:44
were quite popular after the crash or be
0:47
and what happened is people found out
0:50
that the loan plus the interest was more
0:53
than the value of their
0:55
property so they could so actually so
0:58
you you pay interest on the money you
0:59
release it's on the amount that you ow
1:02
it grows so it grows and grows and they
1:03
couldn't get enough um income or
1:07
interest on what they borrowed to pay
1:09
off the debt so when they died they
1:11
actually owed more money and their
1:14
beneficiaries of their estate had to pay
1:16
off that mortgage and that was a big
1:18
problem so nowadays when you get an
1:20
equity release there is one thing you've
1:21
got to make sure you've get and I've got
1:23
to make sure this is it you've got to
1:25
have a no negative equity guarantee
1:30
so if you take out an equity release
1:32
that company has got to guarantee that
1:34
when you die and that property is sold
1:37
so the only time that property you've
1:38
got a lifetime interest you can live
1:39
there till you die or until you get put
1:42
into long-term care and when that
1:44
happens they've got to guarantee that
1:47
there will not be any comeback on you so
1:49
you've got to have that guarantee and if
1:51
you go to any company for Equity release
1:54
and they will give not give you a no
1:56
negative equity guarantee walk away well
2:00
it's just getting to sound a little bit
2:01
complicated so what are the rates you
2:03
get for your Equity depends right if
2:07
obviously you usually you can take up to
2:09
I I don't know what it is in Spain 60%
2:12
but I think in the UK it's only 50% of
2:14
the value of your property you can take
2:16
as Equity release and then it depends on
2:20
what they let you yeah and it depends
2:22
what they you need you negotiate on your
2:25
mortgage rates obviously if you'd done
2:28
this before rates went up it'd be a lot
2:30
less so now if you take out a mortgage
2:32
they may be charging you 6 8% yeah some
2:35
at 5.6 or
2:37
8.9 so you've got to be very very
2:39
careful that's why you need to make sure
2:41
you've got this no negative equity
2:43
guarantee because say there's a crash in
2:45
the market and they sell that property
2:48
and it doesn't cover that mortgage
2:49
you've taken out things in the past have
2:51
been a little bit difficult with some
2:53
Spanish Banks um so I know I'm I'm Ching
2:56
my words carefully um but um so can you
2:59
go to somebody who can help you with
3:01
your Equity release rather than going
3:03
directly to the bank where you have the
3:04
mortgage there are companies that do it
3:06
I'm afraid at Blacktail we don't
3:07
recommend anyone does it because there
3:08
so many people had their fingers burned
3:10
before and I still have people in who
3:12
are still going to court in Spain where
3:15
as we said the property value does not
3:17
Now cover the mortgage and those
3:19
companies are trying to force these
3:20
people out before they're dead and take
3:22
that property and it has been going
3:24
through the courts I know one company
3:26
did one lot of clients did actually win
3:28
their case but they're still waiting for
3:30
the money and for it all to be settled
3:32
as we know in Spain it takes such a long
3:34
time to do anything so people have got
3:37
to be very very wary and people come to
3:39
me and they say can you help or can you
3:41
recommend with anyone with eity release
3:43
I would say no I would say if you are
3:45
going to do it at least do it through a
3:47
bank as long as they will give you this
3:49
guarantee okay the guarantee is all
3:51
important it it it does make sense
3:53
doesn't it perhaps for people over a
3:55
certain age say 55 if they want to stay
3:56
in their own home yeah but most of them
3:58
use it to do homeing improvements what's
4:01
the point in that I can see you doing it
4:03
if you want to go on a world Cruise or
4:05
you want to give some money to your
4:06
grandchildren to go to university but to
4:08
do house improvements on a house that is
4:10
no longer yours and when you die it's
4:12
going to you know it's not even going to
4:14
your children what is the point um I
4:17
don't understand I'd rather downsize and
4:20
buy something that I didn't need to work
4:21
on and have that cash anyway MH so there
4:24
are different ways of thinking about
4:25
Equity relief yes there are yeah and OB
4:28
you can go to your financial advisor
4:29
should talk about that yeah and I would
4:31
say in my opinion I'd rather downsize
4:34
owe nobody no not owe any money to
4:36
anyone and know that I had something at
4:38
least if I wanted to leave to my
4:39
children or something I could sell if I
4:41
need long-term care because if you take
4:43
Equity release and use up all the value
4:45
of your house when you going to
4:46
long-term care how are you going to pay
4:47
for it you don't want to end up in a
4:49
state institution or your or your family
4:53
putting you on a plane and shipping you
4:55
back to the UK and you end up a Gatwick
4:57
Airport and you're putting some state
4:59
home you don't want that so you've got
5:01
to think very very carefully and
5:03
salesman for some Equity release schemes
5:05
are very smooth very professional and
5:07
could talk you into selling your own
5:09
mother really so be very very careful I
5:11
had someone in the other day who said
5:13
we're thinking about Equity release and
5:14
I said well what about your long-term
5:15
care and they said well we was assumed
5:17
if one of us got ill the other one look
5:19
after you I said well say one of you
5:21
dies and one of you needs long-term care
5:24
where are you then you haven't got
5:25
enough savings you haven't got anything
5:27
you've got to think about the financial
5:29
impact not just you're getting cash now
5:31
to spend most of us are living longer
5:33
and most of us will need care but
5:36
speaking from my own point of view most
5:37
of has get a little bit more confused
5:38
the older we get as well so we kind of
5:40
need help in this and these people are
5:42
very convincing you know if you're in
5:44
your 70s and they're trying to create
5:46
create you know convince you to do extra
5:48
release Al that it would be very
5:49
difficult to get at that age please be
5:50
very careful even in your 50s and 60s
5:52
you know financial terms can can be
5:55
confusing they can bamboozle you they
5:57
can give you figures you don't
5:58
understand please please please think
6:00
very very carefully before you step on
6:02
that L why you see quite a few people
6:03
perhaps downsizing because doesn't leave
6:06
ites much more sense or sell your
6:08
property and go into rented property
6:09
invest that money lot of people do that
6:11
too actually lots of people in Spain did
6:12
that especially with the inheritance tax
6:14
rules which now luckily in the v Ria um
6:17
but and in meria and in and Lucia but
6:20
there's still some areas and it could
6:21
always come back if the pp loses power
6:24
and we get back in you know it could
6:26
change but as I said I'd rather consider
6:29
down sizing or selling and going into
6:31
rented accommodation if you're going to
6:32
rented accommodation invest that in a
6:34
lowrisk investment giving you a rate of
6:36
return that will pay your rent and then
6:39
you've got that money to fall back on if
6:41
you need it at a later date
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