Many people who retired to the coast some years ago are finding it more difficult to meet the ever-increasing costs of living from their pension or investment income. There is no question that costs over the last few years have increased significantly but when this is linked to falls in investment returns and stock market crashes, many individuals have had to substantially reduce their standard of living. Retirement should be about having time for relaxation and enjoyment, being free of worries and not having to be frugal and do without certain basic pleasures.
At the same time the value of property on the Costa Blanca has continued to rise at an alarming rate. In fact,  values in Spain have increased within the last 20 years (1980-2000) 6.5 x more than in the 13 richest countries in the world. (Source: Economist). Between 1980 and 2001 real estate prices in Spain rose 726% - adjusted by inflation this makes a rise of 124%. This has led to many individuals finding that the bulk of their wealth is tied up in their property. Unfortunately, for those people living in their properties, their principal asset is not producing income – capital growth, yes – income no.
Equity Release enables you to use the capital locked up in your property to generate additional income. Certain banks will use the property as security for a loan and allow you to invest the funds released into an investment portfolio. With interest rates at low levels it is now possible to invest sensibly and safely at rates much higher that the cost of the borrowing. The additional income generated can be drawn down as that much-needed extra cash.
Most people have worked hard for many years to be free of a mortgage when they come to retire. They want to ensure that there is no risk to their property and home. Equity Release is unlike a conventional mortgage and although a charge would be registered against your property, the lender would look upon the investment portfolio as the principal collateral for the loan. Provided that secure and protected investments are used to ensure that the capital value does not fall, then there will be no risk to your property.
No one knows what may be around the corner and it is essential that you do not enter into an Equity Release Scheme that is inflexible. Circumstances change, and the scheme should be able to adapt to these changing circumstances.
The scheme that we are familiar with, and to which we have introduced many satisfied clients, is available to individuals owning Spanish property with a value exceeding ¤350,000.  The lender is willing to advance funds of up to 100% of property value and up to 25% of this can be released to the owners for whatever purpose they require. The remainder is used to create an investment portfolio from which a regular income can be drawn.
No capital repayments are to be made and the interest arising on the loan is paid out of the income and growth produced within the investment portfolio.
Before entering into any such scheme make sure that all the terms and conditions attached to the loan and the investment portfolio have been fully explained and fully understood. Don’t rush into a scheme because it promises large or exceptional returns, use common sense and seek advice from your accountant or professional advisor.
Equity release can also be attractive to other more fortunate and wealthier individuals living in Spain. They too have seen their property values increase appreciably over the same period. By making additional funds available for investment purposes, they can in effect double the investment opportunities available.