Mortgages 

Asset rich but cash poor


By Alison Barker

You may be familiar with the term ?asset rich and cash poor? but now many people now find that this term perfectly describes their personal circumstances?

This may be due to a number of reasons:- poor performance on investments, falling annuity rates, low interest rates on savings, the currency exchange rate, a rising cost of living, unplanned expenditure or a combination of the above.

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When the exchange rate was ?1.40 to ?1, if you were receiving a State Pension and small Private Pension of, for example, ?1000 this would have given you a euro spending power of? ?1, 400, which would have afforded you a reasonable standard of living.?

Now with exchange rates falling and the cost of living rising this same pension income at present rates (?1.08 at the time of writing) gives you a spending power of ?1,080.?

A massive drop in income and this almost certainly has a great effect on your ability to enjoy a lot of things the Costa del Sol has to offer that have become an accepted way of life; tapas at lunchtime, dinner with friends at a beachside restaurant and regular trips back to the UK to visit family and grandchildren.

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In the current climate many retired people are more concerned about having enough income to pay the regular electricity/telephone and the weekly shopping bills.?

For many eating out has become a rare luxury, maybe the odd ?menu del dia? in the local venta is the only affordable meal out.? What started as an idyllic lifestyle has now become marred by strict budgets and a constant worry about surviving on a restricted income.

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One solution to this now common problem is a Lifetime Mortgage. Dependent upon your age (you have to be over 60 years old) a Lifetime Mortgage allows you to release a proportion of the equity in your property.?

This cash lump sum is yours to spend as you wish ? there are no ?dodgy? linked investment schemes involved.? Of course you may wish to invest some of your monies but this is your choice.

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No interest payments are made on your loan but interest does accrue each month and compounds over the life of the mortgage.?? The loan will only usually be repaid if you move permanently out of your home or pass away.

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Some Important Points:-

???????? No Income requirements

???????? You will always be the legal owner of your property

???????? You can stay in your home for the remainder of your life

???????? Competitive Interest Rate fixed for life

???????? There is a ?No Negative Equity? Guarantee i.e. the amount owed will never exceed the value of?your home

???????? Mortgage provided by a reputable UK Building Society which is regulated in the UK by the Financial Services Authority

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Example

Bill? and Hilda, both 75 years, resident in Spain for tax purposes (non resident owners are still eligible but the charging structure is slightly different) can release 37% of their property?s value.?

If we assume their property has a value of ?300,000, this means that they can release up to ?111,000.? As a very general guideline the costs will be approximately 5% of the loan amount.?

This varies depending on age and residency status.? So in our example Bill and Hilda are able to draw a tax free cash lump sum of just over ?105.000.?

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This sum of money may mean the difference between spending the rest of their retirement happy in the home they love, in a country they have chosen to retire to or returning to the UK and being more dependent on their family than they would like to be.

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Of course the above illustrates the Lifetime Mortgage in simple terms (it is not a difficult product to understand) It is important, however, that you sit down with a qualified, professional and ethical Mortgage Adviser to talk through your individual circumstances and decide if this is the solution for you.

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The author of this article, Alison Barker is a UK qualified Mortgage Adviser and also holds a UK qualification in Lifetime Mortgages. ?Please contact Alison on 952860392 or 626243949 mortgagematters@telefonica.net? for a no obligation chat.

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