The Secrets of Successful
Equity Release on Spanish Property
Equity Release on Spanish Property could well be the next big ‘miss-selling
scandal’ to hit the expatriate community in Spain.
Why do I say this? Well, quite simply, many people are being encouraged to
go into Equity Release without a genuine understanding of what they are actually
doing, without sufficient knowledge of the risks (as well as the benefits)
to allow them to form a balanced judgement as to whether or not Equity Release
is appropriate for them, with unrealistic expectations of investment returns,
no inkling of what could go against them as far as adverse interest rates
or currency exchange changes are concerned and no protection whatsoever if
anything does go wrong following negligent advice from the broker.
Defining/Quantifying the Risks
Equity Release can definitely be a very useful arrangement for many expatriate
owners of Spanish property. They could reduce their liability to Inheritance
Tax, release cash from the capital otherwise locked up in the property
and/or create an income to supplement their retirement income.
However do make sure that the adviser explains carefully - in “non-jargon” language
- all the associated risks. Here are the main questions you should be asking:
- “What would the effect be on my situation if interest rates were
to rise significantly” and “what could I do about it?”
- “What would happen if the investment returns did not come
up to projected levels?”
- “Is the proposed investment a suitable one in terms of risk
and volatility levels for someone with my attitude to risk?”
- “If I borrow in one currency and invest in another, what would
the effect be on my situation if currencies should go against me and
I do about it?”
- “What would happen if property prices were to fall?
How much would they have to fall by before the bank wanted its
- “What would happen if my investment were to fall in bad markets – especially
if that coincided with a fall in property values?”
- “What steps will you, the adviser, take to ensure
that I am always kept fully in the picture?”
- “If anything does go wrong because I was given inappropriate
advice - what rights do I have under the law?”
- “Do I have everything in writing (with copies of any
relevant investment material) signed off by a director of the
Have they shown
me evidence of their regulatory status, as well a copy of their
Professional Liability Insurance Policy?”
- “Who will be keeping an ongoing ‘eye’ on interest rate
movements, investment returns, property values and currency exchange rates
so as to avoid potential disasters occurring? Will I get a written report
each year on the state of my loan/investment – signed
off by my adviser?”
It is simply not sufficient for Equity Release to be considered a sort of ‘one-off
deal’, i.e. you buy it and then forget about it. It’s a long
term arrangement that needs to be structured correctly and appropriately
and then monitored regularly. Remember that, to achieve the IHT savings,
the loan must be in place at death – and this, hopefully, will be many
years in the future.
If you are in any doubt as to whether or not an Equity Release arrangement
is appropriate for you then make sure you seek advice from more than one
broker or adviser. Make sure they’re prepared to put what they say
in writing and that you find out what comeback you have if it subsequently
turns out that you have been given misleading or incomplete information which
causes problems. Make sure they’ve got Professional Liability Insurance
which covers their activities in Spain and also ask to speak to people who
have already had the arrangement in place for at least 2 or more years -
someone who has had actual experience of the scheme – and from whom
you could expect an independent, unbiased opinion.
Ensure that your adviser is genuinely independent and able to offer you
a number of lending sources from which you can choose the arrangement most
appropriate to your particular circumstances. Beware of advisers who can
only offer you one scheme - because that’s what they’re going
to recommend even if there are better schemes available though other brokers.
It shouldn’t matter to an adviser what Equity Release arrangement you
use – all that matters is that it is one which is appropriate for you – and
do make sure that you have, in writing, the reasons why a particular scheme
is being offered over another.
All in all take sensible precautions on what is, in actuality, a very large
financial transaction. Do not simply look at the benefits (great as they
may be) - also look seriously at the risks. Do not enter into an arrangement
which will give you sleepless nights. A good Equity Release Scheme will take
away some of your worries - it should not add to them.
Money Managers CDS S.L., are one of Spain’s very few fully authorised
and licensed expatriate independent brokers.
You can contact
OMM on Freephone 900 808181 or by e-mail at firstname.lastname@example.org or
go to their website at