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Homeowners 60 and older can re-borrow against the value of their homes, as a former player returns to the market to meet “pent-up” demand in the equity release market.
Seniors Money said Monday that it has reopened to new applicants and will offer older homeowners the ability to borrow against the value they have accumulated in their property. Loans are typically used to finance home improvements, improve quality of life, or help support children financially.
The return of Seniors Money to the market has been expected for some time, after the Irish-based management team purchased full control of the Irish and Spanish unit from majority sponsor Quandrant Private Equity in 2018. Seniors Money once had a 250 million euro loan portfolio on the Irish market, but stopped lending due to lack of funds. However, last year it secured financing from Deutsche Bank, which is considered sufficient for two to three years of loans, and is now considering significant “pent-up” demand in the market.
“From the volume of unsolicited inquiries we continue to receive, it is clear that there is strong demand from a significant number of older homeowners who want to use their home equity to raise the funds needed to make their home. or other parts of their more comfortable lives in the latter part of their work life and in retirement, ”said Derek Handley, director of Spry Finance.
Lifetime loans
A new retail division, Spry Finance, will provide information and guidance to those considering applying for a life loan, while the loan itself will be provided by the loan division, Seniors Money Mortgages.
Lifetime loans, or so-called “reverse mortgages,” allow older homeowners (60+ in Spry Finance’s case) to borrow against the value they have built up in their property. Loan repayments are not made during the life of the borrower; rather, the interest is added to the loan balance, which grows over time, and the loan is repayable until the borrower dies or moves out of the property.
However, depending on how long the borrower lives, the interest bill can be substantial, as it is compounded every year, so the borrower ends up paying interest on the interest. For example, at a fixed interest rate of 5.50 percent, the loan balance would double in size after approximately 13 years.
Lifetime loans are typically aimed at asset-rich, cash-poor homeowners. The borrower retains 100% ownership of his property and all that remains goes to the borrower’s beneficiaries.
The new product is similar to that previously offered to the Irish market by Seniors Money. The amount you can borrow depends on your age and the value of your home, for example, a maximum of 25 percent of the property’s value at age 70. However, the big difference is that the interest rate is fixed for life: 5.5 percent – on the new product.
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