Moneymakeover Irish Times: "Life loan proves a millstone for 97 year old"

I have an idea that I discussed why they don't do them and it was a question of capital. Not sure if it was the banking rules or their own rules.

So if they approve you for a mortgage of €100k, but you want only €10k a year, they have to set aside capital for €100k.

They tend to package on these loans and sell them on which would be difficult for a draw down life loan.

I don't think that Spry offers them. But say you needed €10k a year, you could borrow €50k and when it's gone apply for another €50k. Not idea but better than borrowing €130k and putting €100k on deposit as in the Irish Times case. But in the Irish Times case, she just did not need the money.
 
Brendan Burgess said:
I have an idea that I discussed why they don't do them and it was a question of capital. Not sure if it was the banking rules or their own rules.

So if they approve you for a mortgage of €100k, but you want only €10k a year, they have to set aside capital for €100k.
Click to expand...
OK, that makes a certain amount of sense.

But they only have to set aside the capital if they have guaranteed you a fixed rate that will apply to later advances.

There must be room for a product under which:

- you mortgage the house
- you are approved for a loan of a certain amount, depending on your age and on the value of the house
- the loan is advanced in stages as and when you require it
- the interest rate on each advance is fixed for the life of the loan, but it's only fixed at the time of the advance.

Effectively, you're treating each advance as a separate loan, but they are all secured by a single mortgage over the house. There should be no difficulty for the bank in packaging and selling on the advances separately, if they want to.

The disadvantage of this for the borrower is they don't know what interest rates later advances will attract and so there's a risk that, later in life, when they want to borrow more money, they'll find interest rates are high and the additional borrowiing will be less attractive to them.

But the advantage is that they don't have to draw down borrowings, and accrue compound interset on them, at a time that might be many years before they need them. The potential savings are very large (as this case graphically illustrates) and an awful lot of heirs might avoid an awful lot of dismay and upset.
 
I spoke to a person in Spry mortgages

1) They don't do drawdown mortgages but they have announced that they are looking at extending their product range and this is one of the issues they are exploring.
2) Funding a long-term product like this is difficult
3) Most people have enough income to cover their expenses but they go to Spry for capital expenditure like a new car or making their home more comfortable or helping their children/grandchildren with the deposit on a house.
4) The minimum loan is €30,000 but Spry charges a set up fee of €1,500 and the borrowers solicitor will charge between €1,500 and €2,000 so it's an expensive way to borrow small sums. Spry has to meet the borrower and make sure that the product is right for them. So their upfront costs are high.
5) Some people do borrow say €70,000 with a view to spending €50,000 on their home and having an emergency fund of €20,000 - which they put on deposit.
6) Some do borrow €30,000 to cover day to day expenses and come back a few years later and borrow more. The problem with this is that they face the same €3,500 in costs again.
6A) If someone applied to borrow €100k to cover ten years' expenses and planned to put most of it on deposit, they would be told it was unsuitable.
7) A draw down product would approve someone for a loan of €100k and they drawdown €30,000 and later come back for more without needing the full €3,500 of initial charges and legal work. There would still be initial costs with each draw down amount.
8) He is not aware of any other providers looking at the Irish market as the mainstream banks just feel that the negative publicity arising from a handful of cases is just too damaging to their reputation.
 
Last edited:
I also discussed the Early Repayment Charges.

The borrower can repay 10% of the amount borrowed each year without an ERC

There is no ERC in the following circumstances:
  • There is no ERC after 10 years
  • There is no ERC if the borrower sells their home.
  • There is no ERC if the borrower reaches 88 regardless of the length of the loan
  • There is no ERC if one member of a couple dies as plans for the funds may have changed.

Where there is an ERC, it is based on
1) the movements in interest rates from the time of borrowing to the time of repayment. In most cases, the ERC is small or zero.
2) the amount of time left as a proportion of 10 years

So if you borrowed today and interest rates fall tomorrow and you want to repay it the next day, you would have a high ERC. (obviously an unlikely scenario)
But if you want to repay it after 9 years, it would be based on the fact that there is only one year remaining.
 
Last edited:
Advice and clear details here

Competition Authority


Equity release. How can you unlock value from your home in Ireland

Learn how equity release works in Ireland, including lifetime mortgages, home reversion schemes, risks, costs, and what to consider before applying.
www.ccpc.ie www.ccpc.ie

In particular recommondation to get independent Legal AND financial advice. Warnings about Fair Deal, Warnings about State Benefits (like means tested pensions)

Mortgage Brokers

mortgagebrokers.ie

Equity Release Ireland – Is It Right for You? - Irish Mortgage Brokers

Equity release in Ireland explained: how lifetime loans from Spry Finance and mortgage top-ups work, what they cost, and whether releasing home equity is right for you in 2026.
mortgagebrokers.ie mortgagebrokers.ie

They helpfully suggest other options for people needing money, mortgage top ups with repayments, credit union ...

Spry

www.spryfinance.ie

Spry Finance - An Irish Lifetime Mortgage Loans Company

Spry Finance is part of the Irish-owned Seniors Money International group providing Lifetime Mortgages to Irish residents over the age of 60
www.spryfinance.ie www.spryfinance.ie

As far as I'm concerned they are very clear on their product

Law Society

Equity Release Schemes

www.lawsociety.ie www.lawsociety.ie

Advice on asking clients why they are borrowing money (coercion by children/someone - my wording) and also importance of capacity

Safeguarding Ireland

 
Brendan Burgess said:
3) Most people have enough income to cover their expenses but they go to Spry for capital expenditure like a new car or making their home more comfortable or helping their children/grandchildren with the deposit on a house.
Click to expand...
Over the years when we discussed this it was clear from the cases on Moan to Joe that there was a lot of obfustcation going on about what the original amount borrowed was used for. Someone elderly, and yes that means anyone over 60 needing money finds out they can borrow money to upgrade a house, to deal with debt, buy a car, buy a holiday of a life time, all legitimite reasons, say the amount needed is 10K and people close to them discover the house owner can borrow 60K-100K. And the idea comes into being that this is easy money of which they can partake, for a deposit on a house, for their wedding. Then 20 years down the line there is war because the 'inheritance' is eaten up by that loan. Parents may not tell their children about the loan, one child might know and have benefited. This is where it unravels. This is not a fault of the product or of te companies that supply them.

We rarely hear about how most of these loans work out perfectly well. Parents can have a comfortable requirement, can fund a car, repay a high interest loan, or put in home improvements to make older age more manageable. Some might take out an equity realease as they don't want anyone to inherit anything as they are childless and want instead to spend it on a better lifestyle (we had the case on here)
 
Bronte said:
they do not know how many years, they cannot get back the full amount owing of the loan is higher than house sale value. So that’s why the interest rate is higher than normal mortgage rates.
Click to expand...
Not sure that they need to charge more.
For one they'll never have to evict the householder.
Secondly, they also build in a strong buffer as regards the amount they lend relative to the house's value to account for the very few who "live too long".
Thirdly the risk of house prices dropping is closely related to economic downturns which also increases their risks with normal mortgages
where they have to write down amounts owed via Personal Insolvency arrangements.
 
Re the draw down loan. This sounds similar to the old First Active Offset mortgage. Where the money you had on a linked current acccount offset the mortgage interest. So someone could draw down the full amount, and lodge it into a (linked) current account. Then draw on it as needed.
Of course, all that money sitting there might be tempting to draw down quicker, as prompted by needy relatives.

When FA was taken over by Ulster bank, this offset mortgage was discontinued, so I don't know if it was a successful product for the bank.
 
You must log in or register to reply here.
Back
Top