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The Benefits of Equity Release

Article Date : Friday, March 25, 2005       Bookmark on Facebook   Bookmark on Del   Bookmark on Digg   Bookmark on Facebook   Bookmark on Reddit   Bookmark on Spurl   Bookmark on Furl   Bookmark on Yahoo   Bookmark on Magnolia   Bookmark on StumbleUpon   Bookmark on BlinkList

Many people who retired to the Coast some years ago are finding it more difficult to meet the ever increasing costs of living from their pension or investment income. There is no question that costs over the last few years have increased significantly but when this is linked to falls in investment returns and stock market crashes, many individuals have had to substantially reduce their standards of living accordingly. Retirement should be about having time for relaxation and enjoyment, being free of worries and not having to be frugal and to do without certain basic pleasures. At the same time the value of property on the Costa del Sol has continued to rise at alarming rates. This has led to many individuals finding that the bulk of their wealth is tied up in their property. Unfortunately, for those people living in their properties, their principal asset is not producing income. Capital growth yes but income no. Equity release enables you to use the capital locked up in your property to generate additional income. Certain banks will use your property as security for a loan and allow you to invest the funds released into an investment portfolio. With interest rates at low level sit is now possible to invest sensibly and safely at rates much higher than the cost of the borrowing. The additional income generated can be drawn down as that much needed extra cash. Most people have worked hard for many years to be free of a mortgage when they come to retire. They want to ensure that there is no risk to their property and home. Equity release is unlike a conventional mortgage and although a charge would be registered against your property, the lender would look upon the investment portfolio as the principal collateral for the loan. Provided that secure and protected investments are used to ensure tht the capital value does not fall, then there will be no risk to your property. No one knows what may be around the corner and it is essential that you do not enter into an equity release scheme that is inflexible. Circumstances change, and the scheme should be able to adapt to these changing circumstances. The scheme that we are familiar with, and have introduced many satisfied clients to, is available to individuals owning Spanish property with a value exceeding 350,000€. The lender is willing to advance funds of up to 100% of property value and up to 25% of this can be released to the owners for whatever purpose they require. The remainder is used to create an investment portfolio from which a regular income can be drawn. No capital repayments re to be made and the interest arising on the loan is paid out of the income and growth produced within the investment portfolio. Before entering into any such scheme make sure that all the terms and conditions attached to the loan and the investment portfolio have been explained and fully understood. Don’t rush into a scheme because it promises large or exceptional returns, use common sense and seek advice from your accountant or professional advisor. Equity release can also be attractive to other more fortunate and wealthier individuals living in Spain. They too have seen their property values increase appreciably over this same period. By making additional funds available for investment purposes, they can in effect double the investment opportunities available. Article from Views magazine Spain Feb 2005 edition
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