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Releasing equity when you own your own property

  • 28-01-2020 7:26pm
    #1
    SwordofLight
    Registered Users, Registered Users 2 Posts: 350 ✭✭


    I'm just wondering about this, I don't own my own property and when I looked it up I found that there is a scheme but you must be over 55 years old. Thankfully a few years to go before that.
    Is there something like a re-mortgage, where if say you owned a property valued at 150k you could choose a 'mortgage' at a normal rate for 100k of it? Thus giving you 100k to play with?
    Maybe my logic is flawed :pac:


Comments

  • #2
    VonBeanie
    Registered Users, Registered Users 2 Posts: 101 ✭✭VonBeanie


    The scheme you came across is called "Equity Release". Its like a mortgage in that its a loan that is secured on the property. The difference is in stead of making payments as you go along, you wait until you die, then your estate sells the house and pays back the loan and all the interest that has built up. If your house is worth 400k, and you are 70 years old, you can borrow 50k knowing that in all probability, the loan and the interest on the loan will never overtake the value of your house before you die. Its a way of spending some of the value of your house while you are alive, in stead of giving it to your relatives when you die.

    "Releasing Equity" through a mortgage/top up mortgage is slightly different. If you are 35 and your house is worth 400k, and your mortgage is only 150k, in theory you could get a top up mortgage for 100k if you can afford the repayments as the loan to value is still within accepted limits. This was very popular in the Celtic tiger days (I did it myself to buy a buy2let property - ha, those were the days !!). Finding a bank to do it these days would be a struggle. The bank will be happier with you repaying a 150k mortgage on a 400k house, than a 250k mortgage on a 400k house, no matter what your income is - its just additional risk they don't want.


  • #3
    SwordofLight
    Registered Users, Registered Users 2 Posts: 350 ✭✭SwordofLight


    Gosh how did the banks allow that, no wonder the crash had such an impact.

    What about if you own the property outright? Take for example you borrow a loan to help fund a cash buy, and you then want to pay off that loan through getting a mortgage on your property, does this exist?


  • #4
    Samuel T. Cogley
    Registered Users, Registered Users 2 Posts: 10,684 ✭✭✭✭Samuel T. Cogley


    SwordofLight wrote: »
    Gosh how did the banks allow that, no wonder the crash had such an impact.

    What about if you own the property outright? Take for example you borrow a loan to help fund a cash buy, and you then want to pay off that loan through getting a mortgage on your property, does this exist?

    Exactly the same scenario as explained above. You take out a mortgage secured on the property. However if this cash buy is a property for renting you are mad to do that as you can write off mortgage interest against tax when purchasing a buy to let. You might do it for a deposit on said buy to let though.


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