Equity Release in Spain.
What is the process of Equity Release in Spain?
Spanish Homes Online is an exclusive partner of JJC Capital partners. JJC are the largest, first and only English-speaking Equity Release firm who covers all of mainland Spain and the islands.
Expat clients ask us all the time many of the same questions;
- How does Equity Release work in Spain?
- Is Equity Release the same as it is in the UK?
- How much will my equity release cost?
Here’s how it works in practice.
A client will contact us through Spanish Solutions or direct at SPANISH HOMES ONLINE regarding Equity Release.
That is the first positive step.
It is important for us before we present the deal to an investor, to know what the clients’ needs are.
What we need to know before we make an appraisal.
We start by asking the applicant, (homeowner) some questions:
Are you the only name on the deeds? Two names can be a little more difficult, especially if one of them is particularly young. Some homes are in the names of all the children in the family, this will be a difficult situation as we need everyone to agree.
How old are you? As above, the lenders don’t want to engage in a 30-year deal, when they can make the same profit on a 10-year deal.
Do you need all the money upfront or in-stage payments? For example, one of our recent sellers said that he “didn’t trust himself” with a windfall and he was afraid he’d spend it. He just negotiated terms that really suited this particular investor.
Do you have a lawyer? If not we can help and introduce you to a couple of legal firms we work with who understand how this all works.
Are you familiar with the ins and outs of Equity release in Spain? It is important that you know the ownership of the property passes at the very first stage in the notary to the investor. This is different to Equity release performed by a bank in that with a mortgage, the property is “officially” in your name however the bank too is named on the deeds. For all intents and purposes, the house is still very much yours.
Do you understand that with an usufruct, you have a legal entity, which you can even sell? The usufruct is effectively a legal right to live there forever. (this part is almost identical to the UK system). All of this is listed with the Spanish land registry.
Next we ask; can you tell me a bit about your property so that I can present it to our investor panel?
They need proof of what the real value is; for example, if you know of an agent around your area, who is selling similar properties or maybe you have your own home already listed with another agent; all of this helps Spanish Homes Online to get the finance for you.
Of course, our lawyers will ultimately give us a valuation but a realistic estimate just now really speeds things up.
Some homeowners really help us by writing the description, telling us about the characteristics and features of the home. “Walking distance to the sea, views over the pool, etc”. Again, it all helps.
So how do we start the Equity Release process?
To start the ball rolling, we find out what you need and the questions above help with that. We exchange ideas of how much we should pitch the property for. The importance of getting the price right here cannot be overstated. You can ask for any price you like but… really if you are way overpriced you are just wasting your time. Worse still, you’ll put the investors off totally and once they are gone, they are gone! The more accurately we can make the appraisal, the better.
Once we reach an agreement on what you think we should ask the investors for initially, we treat it like a normal listing. We take photos, check paperwork etc. We list it on our portals and send the link to our agents/investors etc.
As soon as someone expresses an interest, we try to close a deal and get you your money as quickly as possible. Our team will take care of viewings, just as we would with a normal sale and our lawyers (usually Spanish Solutions) make sure the deposit is paid, the contract is signed eytc.
Usually, our investors are cash buyers and almost all deals which get to this stage, will complete in the notary. That means you will get paid. We take care of any concerns the investor might have; is there a certificate of habitation, can we rent it in the future, etc
And that is just about that.
A few more questions our Equity Release clients often ask us;
Can I get Equity Release through the Spanish banks?
In theory, yes we can do it but we’ve had almost zero success so far. We tried to deal with Banco Sabadell, Santander and La Caixa, all of whom claim that they offer the facility. They even have advertised the service on their websites but none of the staff knows anything about it. We can say with certainty that now, in mid-2022, the banks will only loan to Spanish residents and the amount of the loan is totally dependent on the applicant’s income. Most of our clients are elderly, don’t work and their income falls well below what the bank is looking for.
If things change, of course, we’ll let our clients know.
Do I need to live in Spain or can I be a foreign national?
You don’t have to live in Spain. We have Spanish property owners based in the Uk or Ireland who apply and successfully achieve Equity Release here in Spain.
How much are my repayments?
In most forms of our Equity release, there is no monthly repayment. The investor panel will work out what they believe the property will be worth when they get possession and they will attempt to sell it, for a profit then.
More safety net for clients.
Do we get a “buy back” option?
Absolutely. If a client sells his property via bare ownership through one of our investors, they have this option. For the sake of argument, let’s say that they sell their 100,000 property for a cash payment after commissions, fees, notary costs etc of 50,000. Within 5 years, the owners, or perhaps the owner’s family, decide they wish to regain ownership of the property, which is now worth 150,000 for say 85,000 euros. Once it has been agreed in advance, that will be absolutely no trouble to us. It is a good safety net for sellers.
How do I decide how to get the money; upfront or in stage payments?
Some of our sellers prefer to get an annuity deal, whereby the value they have in their property becomes almost like a second pension. They can draw down anything from 500 per month to 1,500 pm depending as with everything on the characteristics of the property/deal. Very often, if it is all the same to the owner, we encourage them to take stage payments. Many of our investors like to protect their cash flow so they would rather pay 60,000 over say 10 years, rather than 50,000 upfront today. Taking stage payments, can not always though, increase the speed at which we can get an offer on the table.
Does your investor panel deal with regular personal loans?
Yes, they do, not very successfully however in our experience. We’ve done loans for clients this year, but the investor/lenders look for a very good return for them. up to 12.5% interest!!!!! We encourage you to look at other options before agreeing to these terms.
How “safe” is Equity Release?
All our clients are totally protected. We work with the best lawyers in Spain, and of course, everything is done through the Spanish land Registry and Spanish public notaries.
So can you summarise why would I do this deal with you?
- The Spanish banks in reality cant help with Equity Release.
- Pensions are not going as far as they used to.
- Brexit means British people need to pay for health care insurance.
- The cost of living is rising, even in Spain.
- There are no repayments.
- You can get back out of the deal in the future.
- Why leave all that equity in your Spanish home while you are struggling.
- You can do it in a tax-efficient manner and gift your heirs up to 100,000 euros now, tax-free as opposed to the headache of dealing with probate and inheritance tax in the future.
- Spend the money as you choose.
- No need to move away from your home, your friends and your community.
- You don’t have to deal with estate agents calling to your home, or worse nosey neighbours coming in to take a look around.
- It is private between you and the investors.
- Deals are quick, once you price the property correctly and (relatively) pain-free!