Controversial parole loans for seniors are back
A stock release provider is reopening in this market years after the bank crash put an end to the availability of these loans.
Quity release involves older people mortgaging part of their home before they die, but the loan product has proven to be controversial in this country in the past, as taking one out can sometimes lead to unforeseen problems.
Spry Finance, the new retail division of Seniors Money Mortgages, said it was now open to new clients.
What he calls a life loan allows people over 60 to start borrowing money from seniors against the value of their homes, with all payments suspended for the rest of their lives.
Spry said her role is to provide information and advice to those considering applying for a lifetime loan.
The loan will then be granted by the loan division, Seniors Money.
The company said seniors will be able to borrow against the value they have accumulated in their property without the need to sell, trade or make monthly repayments.
Instead, interest is added to the loan balance, which increases over time, and the loan is only repayable after the borrower dies or the property has left.
Anyone considering a stock release product is strongly advised to take legal and financial advice and involve their children at all stages of the process.
Spry Finance charges a fixed interest rate of 5.5 pc, a multiple of conventional mortgage rates. Funding is provided to Seniors Money by Deutsche Bank.
There has been a huge controversy over equity release loans in the past, with a number of sons and daughters of those who took the proceeds before the bank collapse horrified that their parents’ estates was extremely in debt.
Indeed, no repayment is made during the term of a discharge loan. Compound interest is added to the principal for the duration of the loan. This situation means that the amount owed can double within 15 years.
Older homeowners are often “rich in assets but poor in cash” and would not have access to traditional re-mortgage products due to their age.
A lifetime loan allows them to borrow against the value of their home while retaining 100% ownership and without having to move.
The bank crash forced Seniors Money to suspend the offer of discharge loans in 2008.
Seniors Money had over 3,000 life loans on its books before the financial crisis, of which more than 900 have matured and have been paid in full.
Bank of Ireland also provided life loans before the bank crash.
Residential Reversals and the Shared Home Investment Plan were also on the market for this type of product.
The Central Bank of Ireland recently removed a major hurdle by exempting discharge loans from its mortgage restrictions exceeding three and a half times. the income of a borrower.
This restriction has made it difficult for low-income senior homeowners to qualify for parole mortgage loans.