Financial products usually come with a lot of associated jargon and unique language. In this guide, we break down the essential lifetime loan terms.
Welcome to the fifth and final guide in this five-part series on lifetime loans which aims to educate and prepare you for applying for your own loan. You can find the other guides in this series linked at the bottom of the article.
A lifetime loan, also known as an equity release, may appear like a complicated financial product. In this guide, we’ll break down the most common terms and jargon you might encounter when applying for a lifetime loan.
1. Equity
Equity is the value of your assets after your debts are paid. For example, if your home is worth €400,000, and you have €100,000 remaining on your mortgage, you have €300,000 in total equity.
An equity release product allows you to release some of this equity in the form of a cash sum.
2. Equity release
Equity release is the process of releasing value from your property, in return for a cash sum, without needing to downsize or remortgage.
3. Lifetime loan
Otherwise known as an equity release mortgage, a lifetime loan is a type of equity release product. This product releases an agreed amount of value from your home, in return for a lump cash sum for you to spend as you please.
Unlike a mortgage, there are no repayments required for a lifetime loan, instead the interest builds on the loan amount tied to the equity in your home.
4. ‘No negative equity guarantee'
This guarantee protects you in the event that house prices stagnate or fall below the value of your loan.
If this occurs, the guarantee ensures that you will never owe more than the value of your property.
5. Set-up fee
When you take out a lifetime loan you will be required to pay your lender a set-up fee. This is used to cover the cost of valuing your property as well as any costs that the lender may incur during the underwriting process.
A set-up fee can range from €1,350 to €1,500. You can either pay this upfront or add it to your loan. If you choose to add the set-up fee to your loan it is liable to accrue interest which will increase the cost of the fee over the course of the loan term.
6. Green lifetime loan
A green lifetime loan offers the same as a standard lifetime loan with the added benefit of a lower interest rate and set-up fee.
You can qualify for a green lifetime loan if you have a BER of B3 or above, or commit to certain home renovations.
You can learn more about this type of lifetime loan in our frequently asked questions guide.
7. Early Repayment Charge (ERC)
An Early Repayment Charge, or ERC for short, is an additional cost you may face if you decide to pay back your loan early.
This only applies if you decide to pay back your loan before ten years pass following the drawdown.
8. Loan-to-Value
The loan-to-value decides the maximum loan you can qualify for based on your age and the value of your property.
The older you are the higher the loan-to-value you will qualify for, meaning you can apply for a larger loan than someone who is younger in a similarly valued home.
The loan-to-value ratio starts at a maximum of 15% of the value of your property for someone 60 years of age, increasing to 40% for someone who is 85 or older.
9. Nominated Resident
A nominated resident is the person or people (if it is a joint application) who took out a lifetime loan against the value of their home. As a nominated resident you have the right to live in your property as long as you wish.
If you are not a nominated resident, then you will lose the right to remain in the property following the death or home-move of the loan recipients.
Apply for a lifetime loan on bonkers.ie
Taking the next steps towards getting an equity release is simple on bonkers.ie.
Whether you are interested in renovating your home, retiring comfortably or planning that dream holiday, simply head over to the lifetime loan page, fill in a few details, and arrange a callback with one of our expert financial advisors.
It’s that simple!
Don’t forget to review other everyday household bills too and compare available deals for services such as energy, broadband, banking, and insurance products to see how much you could save by switching to another provider.
Take a look at our other equity release guides
If you found this guide helpful, make sure you check out the other lifetime loan guides in our series. You may be interested in the following:
- Read our Quickstart Guide for a general summary and links to other lifetime loan guides.
- Check out our guide on how to apply for a lifetime loan on bonkers.ie.
- Head over to our most frequently asked questions guide where we break down the most common questions asked by consumers.
- Learn about the key considerations to make before applying for a lifetime loan here.
Any questions?
If you have any questions about any of the points discussed in this guide, or about lifetime loans in general, contact our team today on Facebook, Twitter, TikTok, or Instagram.
