[WATCH] Elderly persons can now liquidate up to 60% of their property's value while keeping their home

Government launches equity release scheme, aimed at allowing retired people to liquidate part of the value of their property, with the money to be repaid back at a fixed interest rate within three years of their death

Finance Minister Edward Scicluna launched the government's home equity release scheme on Friday
Finance Minister Edward Scicluna launched the government's home equity release scheme on Friday

A new government scheme will allow senior citizens to liquidate up to 60% of the value of their property while still being able to live in it.

The equity release scheme will enable retired persons aged over 61 or 62 to make an arrangement with a financial institution, licensed by the Malta Financial Services Authority, to translate part of the value of their property into a liquid asset, which can be paid as either a one-time fixed sum, or as a stream of revenue paid monthly or every three months.

Finance Minister Edward Scicluna, launching the scheme on Friday, said this would be helping elderly people who might be well-off in terms of the value of the property they own, but who do not have liquid assets readily available for them to use in their daily lives.

“The home equity release scheme will allow retired people over 61 or 62 to liquidate a portion of their property’s value, without having to sell that property,” Scicluna said, “This removes the inconvenience of having to sell their home and finding an alternative place to live.”

Once the person in question passes away, their heirs will have up to three years to dispose of the property, he said. At this stage, the financial institution in question will take back the amount which it had lent to the pensioner, plus interest. The interest rate, however will be fixed, and will not change according to the market rates.

The “deal” would also be closed if the person retires into a residential home or sells the property.

The financial institution in question will not be able to give to the person making use of the scheme a capital which is worth more than 60% of the property’s value, which will allow for a 40% safety window to safeguard the institution if the value of the property drops, Scicluna underlined.

However, he said, if the value of the property should drop to an extent that it is not enough to pay back what the person lent, there won’t be negative equity - meaning any potential indebtedness arising when the market value of a property falls below the outstanding amount of a loan secured on it - to pay backm according to the scheme’s rules. “There will be no obligation for the heirs of the person to pay negative equity - the scheme guarantees against this,” the minister said.

The scheme requires that the person is given independent advice before opting for it. “The scheme's rules stipulate that an independent financial expert give advice to the elderly person in question,” Scicluna added.