Do you have questions about lifetime loans? In this guide, we answer the most frequently asked questions from consumers.
This is the fourth guide in this five-part series on lifetime loans. You will find the other guides in this series linked at the bottom of the article.
Applying for a lifetime loan is a major financial decision, and therefore you may have lots of questions. To help you understand more about lifetime loans, we’ve answered some common questions you may have.
1. What is a lifetime loan?
A lifetime loan is an equity release product, also known as an equity release mortgage.
Equity is the value of your assets after all debts are paid off. For example, if you own a home worth €300,000, and you have €100,000 left to pay on your mortgage, the equity in your home is €200,000.
A lifetime loan is a type of financial product that allows you to release some of the wealth you already have tied up in a property you own, without having to sell up or downsize.
Unlike a mortgage, with a lifetime loan there are no repayments needed, and you will be protected by a ‘no negative equity guarantee’, meaning that you will never owe more than the value of your home.
2. Should I apply for a lifetime loan?
A lifetime loan is worth considering if:
- You do not want to sell your home or move house
- You would like access to a cash lump sum
- You are not concerned about passing on the full value of your home to family or other beneficiaries after death
To read more about potential considerations to make, check out our other guide in this series that breaks down things you should bear in mind before applying for an equity release.
3. What is a green lifetime loan?
A green lifetime loan is designed to reward borrowers who have an energy-efficient home or who are looking to improve their home's energy efficiency. These loans offer a reduced interest rate and set-up fee.
You could qualify for a green loan if:
- Your home has a BER of B3 or higher
- You intend to use your lifetime loan to fund home improvement projects to achieve a B3 rating within 12 months of the drawdown
- You intend to use 50% or more of your loan on select improvements, such as insulation, solar panels, and heat pumps
4. What is the maximum amount I can borrow?
The maximum amount you can borrow with a lifetime loan depends on your age, and the value of your home.
Your age decides the percentage of the value of your home you can borrow. This is known as the loan-to-value ratio.
The older you are, the greater the percentage value of your property you can borrow. For example, someone who is 60 years old may qualify to borrow 15% of the value of their home, while someone who is 85 could borrow up to 40%.
If you are applying as a couple, the age of the youngest applicant will be used to judge the maximum loan you can qualify for.
The maximum loan amount you can apply for is €500,000, irrespective of age or overall property value.
5. What conditions does my property need to meet?
As your lifetime loan is borrowed against the value of your home, a lender will want to ensure that your property is in good condition and is used for the correct purposes. This is to make sure that the value of your home does not diminish over time. If your home does not meet the standards and/or criteria set out by the lender then you could be refused the loan.
Your property will not be accepted by a lender if it is:
- Not your primary residence
- Used for commercial purposes
- Has a leasehold with less than 99 years remaining
- Outside of the Republic of Ireland
- An investment property or buy-to-let
- A holiday home
- A property whose principle value is its development potential
- In a poor state of repair, or of non-standard construction
- Isolated and very rural
- A farmhouse that cannot be separated from the farm
- A period home or non-standard residence
6. After taking out a lifetime loan can I rent out my property or lease rooms?
No, you can’t.
Firstly, if the property you are applying for a lifetime loan against is used for buy-to-let purposes, you will be refused a lifetime loan.
Secondly, if during the term of your loan, you decide to lease part or all of the property, you could void the agreement made with the lender. If you would like to lease part of the property, you must get explicit permission from the lender beforehand.
7. Can I increase the size of my loan in the future?
It depends.
If, down the road, you decide that the original sum you received is insufficient and would like to borrow more, you will need to apply for a new loan. To do so, you would need to qualify for a new, larger loan, to pay off the proceeds of your old loan, as well as for the money you would like to borrow extra. Not everyone can qualify to borrow more as it depends on your age, financial circumstances, the size of your previous loan, and the equity remaining in your house.
For example, if your loan balance is currently €50,000, and you would like to borrow more, you would need to qualify for a new loan of say, €80,000, to pay off the existing loan and provide you with an extra €30,000 in cash.
The process for this is the same as applying for the original loan, involving property valuations, set-up fees, and legal fees.
8. Can I repay my loan at any time?
Yes, you can.
You can pay back your loan whenever you want, however, early repayment charges (ERCs) may apply. ERCs apply if you decide to pay back your loan within ten years of taking it out. If you pay back your loan after ten years, no repayment charges will apply.
Additionally, if interest rates rise higher when you decide to pay back the loan than when you took it out, ERCs are waived. Other exemptions exist such as in the event you die or move into full-time care.
Before you decide to repay your loan you should discuss your options with the lender first.
9. Will I still own my property?
Yes, you will continue to be the owner of your property and can continue living there for as long as you wish.
10. Can I move home after I take out a lifetime protection loan?
Yes, you can.
As you are still the owner of your home you are free to sell it if you desire. However, you will be faced with some obstacles. For instance, when you choose to move house your loan becomes due for repayment.
It is possible to move your loan over to your new property, however, you must inform your lender first. If your new home is worth less than your current property, you may be liable to repay some of the loan.
11. How much will I be able to leave to my family?
This entirely depends on the size of the loan you take out, the interest rate on the loan, and the value of your home over time.
The greater the size of your loan, the less equity in the home you can pass on to your loved ones once you pass away.
To find out more, you can discuss estimates of your loan balance over time with your lender, to help you get an idea of how much equity you will have in the future.
12. Will a lifetime loan impact my pension entitlement?
It can.
Although a lifetime loan will not impact any contributory pensions, some non-contributory pensions could be affected. This is because these types of pensions are means-tested and therefore receiving a cash lump sum could impact entitlement.
Before you take out a lifetime loan, you should contact the Department of Social Protection to find out if a lifetime loan would have any effect on such benefits.
13. Are there rules on what I can spend the money on?
No, there are no rules on what you can spend your loan on.
Usages for the money could include helping relatives get on the property ladder, setting up a retirement fund, retrofitting your home, or going on a dream holiday.
14. What happens if my loan becomes more than the value of the house?
Because of the ‘no negative equity guarantee’, you will never owe more than the value of your home, provided you are not in default.
To learn more about what the ‘no negative equity guarantee’ is, check out our guide on the most common lifetime loan terms.
15. Will going into permanent care impact my lifetime loan?
Yes, it will.
If you enter permanent care or a nursing home, your loan will become repayable 12 months after you have stopped residing in your home. If you are unable to source funds to pay off the loan while in care, your home will be sold to cover the cost of the loan repayments.
If you are unsure whether you will need permanent care in the future, it’s important to remember that you will have less equity in your home after taking out the loan. If you were planning on funding permanent care in the future from the value of your home, you should discuss this with your lender or financial advisor in advance.
16. What happens when I die?
12 months after you pass away your loan becomes repayable. If the loan is not paid off by external funds, then your home will be sold and the proceeds of the sale will pay off the loan. In cases like this, if there is someone else living in the home they will have to vacate the property so your home can be sold.
Apply for a lifetime loan on bonkers.ie
Applying for a lifetime loan is easy on bonkers.ie.
Whether you are interested in improving your property, helping a family member get on the property ladder, or planning for retirement, simply head over to the lifetime loan page, fill in some details, and arrange a call with one of our seasoned financial advisors.
It’s that easy!
While you’re here, don’t forget to compare other household bills too for services such as energy, broadband, banking, and insurance products to see how much money you could save.
Take a look at our other lifetime loan guides
If you found this guide helpful, make sure you check out the other equity release 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.
- Take a look at the most important things you need to consider before taking out a lifetime loan.
- Confused by the jargon? Read our guide explaining the most common lifetime loan terms.
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.
