Key Post Spry Finance Lifetime Loans

Brendan Burgess

Brendan Burgess

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I find the Spry Finance website complicated so this is my summary of it.

If you are at least 60, you can take out a Lifetime Loan from Spry Finance. There are no other providers in the Irish market which is a pity.

You do not have to make any repayments, they will roll up the interest.

The interest rate is fixed for the duration of the loan - it is currently 6.7% (or 6.5% if you qualify for a Green rate)

The maximum you can borrow is set out in the following table. If a couple owns the house, it is the age of the lowest person which counts.

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You can borrow between €20,000 and €500,000

There is a set-up fee of €1,500

The interest rate is 6.7% fixed for life.
 
Early repayment charge applies in the following circumstances:

You can repay the interest as it arises if you wish.

You can repay up to 10% of the original loan balance each year without an early repayment fee.

After 10 years, there is no early repayment charge.

If you repay more than 10% of the original balance within 10 years, you may face an early repayment charge.

This is calculated by a complex formula. As a general guide, if interest rates have risen since you took out the mortgage, there will be no early repayment charge. If interest rates have fallen, there will be an early repayment charge.
 
When is the loan repaid?

When the person dies.

When the person moves into a nursing home.

In these events, there is no early repayment charge.
 
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Other points

There is a "No negative equity" guarantee. In other words, if you live for a long time and pay no interest and house prices fall, your family won't have to pay anything.

You can trade down and, in most circumstances, transfer the loan to the new property.
 
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Alternatives to a Life Loan

A Life Loan is expensive.

A typical home loan mortgage rate is about 4.5% compared to 6.7% for a Life Loan.

So if you need money, can your children lend it to you? It would make sense for them to remortgage their own home at 4.5% instead of you paying 6.7%.

You can pay the interest as it arises

One of the criticisms of the Life Loan is that

€100,000 @6.7% over 11 years with the interest rolled up amounts to €204,000!

There might be nothing left for the kids.

But if you or the kids pay the interest every year as it arises, then after 11 years, you will owe exactly €100,000!
 
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Lifetime loans and means-tested benefits

The Contributory OAP and Widow's Pension is not affected by the Life Loan.

If you are receiving a means-tested benefit such as the Non-Contributory State Pension and you have a lump of cash, it would affect the amount of pension you get.

Lifetime Loans and the Fair Deal Scheme

If you take out a Lifetime Loan and later move into a nursing home, you will have to sell your home. The amount of cash you have left will affect the amount you have to pay towards your nursing home care.

If you need the cash now and are not imminently moving into a nursing home, then this should not be a factor in your decision.

This guy recommends against taking out Lifetime Loans, but I don't agree with such a blanket dismissal

fairdealadvice.ie

Life Loans And Their Implications On Long Term Care Funding

At Fair Deal Advice we from time to time come across older persons looking to apply for the Fair Deal who have previously taken out Life loans.
fairdealadvice.ie fairdealadvice.ie
 
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