Equity Release and Bare Ownership

We are posting this article on equity release and bare ownership for our partners Spanish Equity Release Solutions. They will offer you the perfect solution to unlock some of the valuable equity in your home.

Are you asset-rich but cash-poor?

Do you need access to available cash in later life ?

If you have answered “yes” to these questions then we can provide you with a bespoke solution tailored to your specific requirements.

Our service provides you with the peace of mind of a legally watertight means of unlocking the income in your most important and valuable asset.

Advantages of equity release

You continue living in your home but release some of the money tied up in the property.

You do not need to repay until you pass or enter long term care.

You access much needed funds to supplement your retirement income.

You can use the money to:

Go on holiday

Buy a new car

Help your dependents get on the property ladder

Pay off debts

Redecorate your home

Extend your home

Fund long term care for you or your partner

How to Access the Funds

You can choose to release up to 50% of the equity in your home.

The older you are the more equity you can release.

You can choose to pay nothing during your lifetimes and payment of the sum released plus interest can be rolled up and paid when you pass on or move into long term care.

If you have a serious medical condition or have been diagnosed with a life-threatening condition you may be able to release more equity on favourable terms.

You can opt for a lump sum or a regular monthly sum depending on the reason for equity release.

What You Need To Know

You will receive less money than if you sell your home on the open market.

Equity release means you will not be able to leave as much to your beneificiaries.

You will never owe more than the value of your home.

You can repay off as much or as little as you want rather than wait until you pass or enter fill time care.

You do not need to access the equity release limit and can access smaller amounts over the years.

Additional Benefits

Spanish Equity Release Solutions provide a fully inclusive service whereby they take care of the following matters so you can concentrate on enjoying your money :

Legal contracts.

Wills.

Probate.

Health care.

Residencia.

Non-resident taxation.

Long term health care.

Legal advice.

Alternative to Equity Release: Bare Ownership

If equity release is not for you then you can enter into a contract of usufructo.

Usufructo is well recnognised under article 467 of the Spanish Civil Code and traditionally used to reduce or avoid liability for inheritance tax on death.

If you opt for this type of contract you will be known as the “usufractario” and similar to equity release, will be able to stay in your home.

The difference is that you enter a contract whereby you transfer ownership of the property to Spanish Equity Release Solutions in return for being able to stay in the house until you pass or enter full time care.

Advantages

You stay in your home until you pass or enter full time care. You do not need to pay any sums until you pass or enter full time care. You are not required to maintain the property (only paying for minor repairs and decor).

If you are interested in the above please contact us for more details.

Below is a short email correspondence with a client, Nicky, who kindly gave us permission to use his emails.

Hi Ian,
Thank you for the email. Please can you give me some time to discuss this with my children. It does sound very interesting. Quick question would I be allowed to continue renting the property in Lanzarote? I currently do well before covid -19 and was taking an income from it ? Could i offset the rental payment against what i owe the fund? 
Many thanks
Nicky 

Hello Nicky,
Thanks very much for the email to us. 
My name is Ian, as you know by now, I am one of the directors of Spanish Solutions. 
I’m also involved in Spanish Equity Release Solutions, an investment fund looking to help clients like you with their cash flow problems. 
We are the company who they use to ensure legally and from a taxation point of view, everyone is protected here in Spain. Pre Corona Virus we were ready to launch a fantastic idea called Bare Ownership, but naturally, as you’d expect, everything now has been turned on it’s head! 

The product we were promoting was a Bare Ownership purchase, effectively our investor group would buy your home and give you an usufructo- An option to live in the house for ever, or until you go into state care. Your situation is slightly different as you are young, and do not live in the house. Anyway, I’ll continue….
You would get into your hand, after the smoke clears around half the real value of the home. An usufructo is a legal clause and is common here in Spain. We may still be able to offer this to our clients, but things post coronvirus are different in Spain as they are everywhere.

The new idea is, I think, better for the home owner while being a much safer bet for the investor. This might be a win / win solution and I’ll really be interested in your opinion in it. 

In your case, lets assume Tinsa value your home at 200,000 euro. 
Our investor will purchase one third of the property with an investment of 60,000 euro. They will pay all costs etc from that amount, tax, notary, your legal expenses etc and the deal is registered in the Land Registry of Spain. (just like a normal property purchase). After you sign, you have loads of options then. 
1. you can pay “rent” (the fund is not a bank so they cannot call it interest) The amount will be off the top of my head 6 to 7.5% rental yield to the fund so 300 pm approx. Exact amounts can be discussed closer to the time you make a decision- this is just for discussion purposes.
2. you can roll the payment over so rather than making the payment every month, you will, after month one, owe not 60k euro but 60,300 for example and on it goes every month. 
3. You can mix the two- start off paying and then switch if you no longer want to make payments etc. 
4. You have the option to pay off the investor at any time. It is still your house and Spanish solutions will protect you legally to ensure they never try to move in or anything like this.

All contracts and indeed the exact details of the process they are using to facilitate this brand new idea in Spain are available to your solicitors to examine.  

If you don’t pay off the amount and after your time, for the sake of argument you owe 80,000 euro. Spanish Solutions will help your heirs with probate and all legal and taxation concerns. Once your heirs are happy they too have an option. They can pay off the debt, just like you would in a bank or personal loan from your neighbour or sell the property and use the fund to pay the debt off then. That is pretty much it.

It took 9 months for our lawyer to find the exact legal conditions and not get in trouble with the Bank of Spain. We are 95% of the way there now. What do you think about the deal? We think the very best part is that our client, the property owner has all the options- Make monthly repayments, clear the debt, allow it to accumulate etc. 
If you are interested, I can get some exact figures for you- the ones i use here are just typical of what the fund is offering and the final deal depends on a number of factors. (again just like a normal property purchase, the Tinsa valuation should be around what you think it will etc). 

We think that Equity Release is going to be exceptionally important as we try to recover from the Corona virus crisis in Spain. 

If you are interested, we can start the process for you, despite the lockdown. I’d really appreciate your feedback before we launch. 

Kind regards,

Ian

Hi Ian

Just a few questions my son and I have for you and I wonder whether you could answer for us as we are still very much interested in looking into this type of Equity release.

We were wondering who that company is?  

Hello Nicky,

Some excellent questions here. 

Firstly, I am the owner of Spanish Equity Release Solutions, a small trading name for the fund which for now is called The Funding Factory! Are you confused yet? 

Funding Factory is borrowing many millions of euro from a large, very well known and respected British Pension fund who wants to invest in asset backed “debt” in Spain. 

Once the fund is ready to launch in Spain, they will form a Spanish REIT, and at that time you will be able to see exactly who is involved. 

Garrigues lawyers in Alicante are helping put the structure together.

With regard to the costs. We think they can probably be around 10 % of € 60.000? Would you be able to give me a written statement of the total costs I would need to pay? 

Absolutely, and this is a slight legal delay for us. Can the fund ask the property seller to pay the purchase costs? This is currently with the lawyers. 

Typically (please don’t hold me to these rough figures) you’ll pay 10% tax, 1,500 notary/land registry, 1,500 conveyancing, 300 valuation from Tinsa- Something like this, but the Spanish solutions team will break that into exact figures for you before you sign).

What interest would the unpaid monthly fee generate? Still 6 to 7.5% % per annum? 

yes, however final figures are not yet available to us. More likely closer to 7.5% compounding if you do not make monthly payments. Remember it is not interest as such- We are not a bank so it is referred to as “rent” for now, but I guess that is all the same to you. 

With regard to this paragraph about rolling the amount of rent due to the maturity of the arrangement.

Would this  be very expensive as Spanish lawyers can charge about 10 % of the value of the estate in fees for dealing with an estate. Of course, at this moment in time I assume it would be difficult to give an indication of fees and costs that may become due in 20 years from now.? 

It is difficult to say, but your heirs can decide. I know a lawyer in Malaga who does it for 2,000 euro, it depends totally on the case. However, your heirs have all the options.

Sorry for so many questions but obviously we are just trying to be very cautious as such a big decision for us. 

Many thanks for your time Ian

Look forward to hearing your reply 

Very kind regard 

Nicky

Pleasure as Always Nicky. 

Best wishes, 

ian