The global financial crisis has completely altered
the landscape for anyone wishing to borrow from traditional lending sources
such as high street banks which either don’t have the capacity to lend because
they are struggling to redress their balance sheets or have simply lost the
appetite to lend on what might appear on the face of it the safest of
The ‘liquidity crisis’ has also impacted on equity
release schemes in Spain where interest could be rolled up without the need for monthly debt
servicing. Home owners looking to release capital from their property now face
an uphill task in releasing cash. However, creative solutions can be found.
Whilst traditional lending sources may have dried
up there are private banks and boutique lenders willing to offer facilities to
high net worth individuals at extremely competitive terms particularly where
there is an opportunity for a bank to secure additional business.
We have strong relationships with many banks
through which are able to provide credit to clients unable to rely on their
existing lender. Our role as intermediary is not only to source the facility
but to present a detailed proposition to the lender in a way that will improve
the prospects of a successful outcome whilst protecting the interests of the
client at all times.
Similarly clients looking to release equity from
their Spanish properties may find it more advantageous to include their UK
property as part of a portfolio offering as this opens up the door to
prospective UK lenders.
Equity release could potentially have an additional
advantage of reducing your estate liability for inheritance tax purposes. If
you are single with no direct descendants and own your home mortgage free in
Spain you have a massive potential IHT liability on that property. If you own a property worth say €2.5 million
your beneficiary would have to pay tax in excess of €800,000 to inherit your
home and unlike the UK where the estate of the deceased pays inheritance tax in
Spain it is the beneficiaries who are liable for the tax before assets can be
It is important that your overall financial
requirements are assessed rather than dealing with the borrowing in isolation.
There may be better options available than releasing equity from property such
as the drawdown of a tax free sum from a pension fund. You may have to transfer
non pension assets into a QNUPS and draw down pension income to demonstrate you
can service the debt before you can secure any lending. Investments can be turned into income
producing assets in a tax efficient way through the use of offshore wrappers or
you may be lucky enough to own a plane or a yacht where we can negotiate an
improved facility to extract equity or reduce costs.
Whatever your motives for looking to release
equity, be it to reduce your estate liability for IHT purposes or simply to
maintain your current lifestyle it is essential you speak to a financial
adviser who can take a holistic view of your financial situation.