Equity Release is a buzzword that seems to be on everyone’s lips these days so I thought I would investigate this phenomenon to understand a bit more about it.

WHAT IS EQUITY?

With the increase in house prices in recent years, you may find that you have substantial equity in your home.  Quite simply, equity is the difference between the market value of your home today and the amount you owe on your mortgage. As an example let’s assume you home is worth €350,000.  Now let’s also assume that you still owe €100,000 on your mortgage.  The equity therefore is the difference between €350,000 and €100,000, which is €250,000.

Releasing equity is also a great method by which to finance educational fees and medical expenses. Topping up your existing mortgage using a bank’s Mortgage’s equity release product is one of the cheapest ways to borrow as it is based on your current mortgage interest rates.

BUY AN INVESTMENT PROPERTY/ HOLIDAY HOME

Use the equity to purchase an investment property or holiday home. Many Irish people today are now taking advantage of the substantial equity built up on their homes over the past years to purchase an investment property or a holiday home. You can now fund for 100% of the purchase price of the property and all associated costs including stamp duty, legal fees and fit out.

Depending on the amount of equity in your home, you can release some of this to help purchase an Investment Property. An example of how you can reinvest using the equity on your home is as follows:

BUILD AN EXTENSION

An alternative to trading up is adding an extension to your existing home. The most efficient way of facilitating a loan for this is by releasing equity in your home, rather than availing of a bank term loan at a higher rate of interest. In addition to this, if you use Equity Release to build or extend, you may be able to claim extra mortgage interest relief against your income tax. If you are buying an overseas property, we can help you manage the impact of foreign exchange on your investment.

CONSOLIDATE YOUR LOANS

You can also use the equity to clear any existing loans that you may have, this will help to reduce your monthly outgoings & will be at home loan rates as opposed to term loan rates of more than double that of a current variable rate.  However, one must be careful not to be lulled into a false sense of security and start borrowing again and find themselves in the same situation in a couple of years.  It should also be noted that you are consolidating short term loans over the term of your mortgage.

The minimum loan amount is €10,000 and the maximum is restricted to the total of your new loan plus existing loan(s) not exceeding 90% of the current market value of your home.

Minimum Term - 1 year, Maximum Term - 30 years.

Warning: This new loan may take longer to pay off than your previous loans. This means that you may pay more than if you paid over a shorter term.

If you would like further information contact Fitzsimons Finance on Cutlery Road in Newbridge, your independent advisor. Tel (045) 438 438 or email barry@fitzsimons.ie