Looking to free up the equity locked up in your home? Equity release can free up cash tied up in your home for holidays, gifting to the kids, home improvements, a new car and more. Releasing equity from your home can also be a good way to solve financial issues like paying off other debts, freeing up cash for a divorce settlement or to help your kids get on the property ladder.
Equity Release is only open to people over 55 in Ireland, in this article we will give you the lowdown on whether Equity Release is right for you and what options are available. If you are under 55 your can still free up cash from your home with a mortgage top up.
Equity Release comes in two flavours,
- Lifetime Loan – You get a tax free loan which you pay off plus interest when you move out and sell.
- Home Reversion – You get a tax free lump sum for selling a portion of your home, but are able to continue living there.
Both types of equity release can be a good solution if you need cash but want to stay in your home and are becoming increasingly popular.
Interested in releasing equity from your home? You can get in touch with an expert equity release advisor here, who will step you through each stage of the journey.
The option that’s best for you depends on your particular circumstances so read on to find our if equity release is right for you and which type would be the right option.
- What Is It and How Does It Work? – Equity Release Ireland 2023
- Equity Release Alternatives – Equity Release Ireland 2023
- Equity Release Pros and Cons – Equity Release Ireland 2023
- Equity Release Top Tips – Equity Release Ireland 2023
- In a Nutshell – Equity Release Ireland 2023
What Is It and How does It Work? – Equity Release Ireland 2023
Equity is the cash you would get if you were to sell your home right now. This is the difference between the value of your house and what you still owe on it.
Equity release products are a way of getting at the value locked away in your home without having to sell up and move out. In return for letting you get your hands on the cash right now though, you will have to give more of your homes value away to the financial providers when you eventually move out.
Equity Release is becoming increasingly popular, in the UK over half a million people have released equity from their home. As well as paying off their debts many have used the cash freed up to help their kids get a foothold on the property ladder, giving over £5 Billion to their children through equity release.
According to a recent study in the UK these are the main things that people did with the cash they freed up from Equity Release.
- Repay other debts (51%)
- Take a holiday (20%)
- Improve lifestyle overall (19%)
- Give to kids (including as a deposit on a new home) (16%)
- Make home and garden improvements (15%)
There are two providers of Equity Release products currently in Ireland, Spry Finance and Home Plus, both of whom have been in Ireland for decades and are regulated by the Central Bank of Ireland.
Life Time Loan
Spry Finance offer what is know as a Lifetime Loan. This is the most popular form of equity release where you borrow some of your home’s value at a fixed interest rate.
You can choose to either leave the repayments to when you move out and sell your home or pay off some of the interest monthly. If you don’t make any monthly payments the interest that builds up will eat into what is left over from the sale of your property for you or your family when you do move out though.
The Spry Equity Release product guarantees however that the money you will have to repay at the point of sale will never be bigger than the value of your home, so you won’t pass on any debt to your family.
Home Plus offer the other type of equity release, known as Home Reversion. With Home Reversion the provider pays you a tax free lump sum for a portion of your home at a discount to the market price.
So when the property is sold you (or your family/estate) and the provider split the proceeds depending on the share they have purchased. So if house prices have risen since you sold a share of your property you will benefit less.
Please note that Home Plus the only provider of Home Reversion loans in Ireland has currently placed it’s home reversion business on hold, so lifetime loans are the only option for equity release right now.
Equity Release Alternatives – Equity Release Ireland 2023
Before we go any further into releasing equity from your home, the question you need to ask yourself is
Is Equity Release Right for Me?
There is a cost to Equity Release either in the interest rate you pay with a lifetime loan, typically around 5.5%, or in the discounted price that is offered for a share of your property with a home reversion.
That’s why you should consider your alternatives carefully before making any commitments to release equity from your home.
Although current mortgage interest payments are at record lows, interest payments really mount up over longer periods. An option that doesn’t involve paying more in interest or discounting your home value is to sell up and move to a smaller property.
You will probably incur around €1,500 in solicitor and valuer fees in the process, but this is much less than you would pay in interest or discount, so financially speaking is a much better option than equity release.
If you’re settled in an area emotionally this can be a big wrench, so you will have to balance the cost to your quality of life with the financial cost of equity release to come to a final decision on what’s best.
Equity Release Pros and Cons – Equity Release Ireland 2023
So here’s some of the key things to consider when thinking about releasing equity from your home.
- You can access cash now and continue to live in your home
- You can’t lose your home while you live there, it’s insured and in good condition
- You won’t leave any debt to your kids due to the “No Negative Equity” guarantee
- You are free to do whatever you like with the cash you free up
- Cost through interest (lifetime loan) or discounted sale price (home reversion)
- Costs to arrange a solicitor and valuer for your home, around €2,000 in total
- Potential impact on means tested social security benefits
- Lack of flexibility (you may not be able to downsize later or pay off as early as you’d like)
You can get in touch with a qualified equity release advisor here.
Equity Release Top Tips – Equity Release Ireland 2023
1) Release equity from your home in phases
If you are thinking about releasing equity from your home you don’t need to take it all out at once. By taking it out over time you can reduce the overall amount of interest that you will pay.
There is no point in having cash from your lifetime loan or home reversion sat in the bank not being used and earning no interest. So only take out what you need to reduce the interest you pay on the lifetime loan overall.
While we are on the subject never release equity to fund speculative investments, focus on taking out the minimum you need for your own use.
2) Talk to those who might be effected
If your thinking of Equity Release it may make sense for you to talk to members of your family who may be effected.
If you are going to take cash out of the value of your home now, that means there will be less cash from the sale of your home if you die or have to move into long term care.
This can cause issues with family members who may see the family home as part of their ‘inheritance’.
There is obviously no legal reason you have to discuss your decision with them, but it can save some heartache when your decision to take equity release comes to light later on down the track.
3) Get advice
Equity Release is a big decision and you should get advice and guidance through the process from a qualified financial advisor and a solicitor.
If you use a qualified financial advisor who has an appointment with Spry Finance or Home Plus from the Central bank of Ireland they will probably be free to use, as the providers will cover their costs. You can get in touch with a qualified financial advisor who can talk you through how to get a lifetime loan or home reversion here.
You will have to pay for a solicitor, with fees ranging from €1,350 to €2,500 depending on who you use. We recommend Jacob Law who operate nationwide as they specialise in equity release arrangements and operate nationwide. Please quote moneysherpa if you want to secure the best rate.
In a Nutshell – Equity Release Ireland 2023
Equity release is growing in popularity if you’re over 55 as a way to free up much needed cash from your home and still continue to live there. If you’re under 55 the equivalent is a top up mortgage.
You can use it for yourself or to free up cash for your kids, often to help them get on the housing ladder. It is relatively costly compared to downsizing so you need to weigh the pros and cons of both.
If you do want to go ahead with equity release you should get qualified financial advice.
The most common way to release equity is through a lifetime loan, the only provider of these in Ireland right now is Spry Finance who are regulated by the Central Bank of Ireland.
What’s next – Equity Release Ireland 2023
You can get in touch with a qualified financial advisor who can talk you through how to get a lifetime loan or home reversion here or you can check out moneysherpa’s reviews of the two equity release players in the Irish market Spry Finance lifetime loan review and Home Plus home reversion review.
Our founder Mark Coan chatted to Ian Higgins CEO of Home Plus on the moneysherpa insider pod recently which you can listen to here. They cover releasing equity to help get your kids on the property ladder, to help with divorce, with a home retrofit and lots more.
He also caught up with Aidan Horgan COO of Spry Finance the lifetime loan provider on a later pod which you can listen to here,
How to release equity from your home in Ireland?
If you’re under 55 you can use a ‘mortgage top up’ to release cash for home improvements. Over 55’s can access their equity using either a lifetime loan or a home reversion for a wider range of uses. A qualified mortgage broker can advise on which option would suit you best.
What is equity release?
Equity release is a financial service typically accessed through a mortgage broker that allows you to turn value locked up in your home into cash you can use day to day.
What banks do equity release?
All lenders offer what are known as ‘top up’ mortgages these are only available for a limited number of purposes such as home improvement, only Spry Finance and Home Plus offer full equity release in Ireland for those over 55. These products can be used to fund pretty much anything including holidays, gifts to children, purchases or donations. A qualified mortgage broker can advise on the best product for you.
RTE also spoke to Mark about the benefits of equity release and lifetime loans for an article which is available here .
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