May 21, 2012

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The pros and cons of equity release

May 17, 2012 By Danielle J

Many older people use equity release plans to realise some cash from the value of their home. This can give them money that can be used how they choose during retirement, and is not repayable until after their death and their property is sold.

As people have started to live longer and remain fit and able enough to do lots of travel and other activities in their retirement, equity release plans have become more popular.

You can look up the different types of equity release schemes at Age Partnership, an independent company that researches all the different equity release plans available and finds the one that is most suitable for an individual’s circumstances.

There are two basic types of equity release – lifetime mortgages and home reversion plans.

A lifetime mortgage is a loan that uses the value of your property as security. Interest is added at a fixed or variable rate on the loan and you get a tax free cash sum or a regular income that you can receive. The loan is repaid after you pass away, when the property is sold.

A home reversion plan means selling all or a part of your home to the reversion company. In exchange, you get a lump sum of cash and to live in the property rent free until you pass away.

A drawdown option is more flexible as you take cash on the value of your home as and when you need it. You will only be liable to pay interest on the amounts withdrawn.

The advantages of these kinds of plans are that you get a lump sum tax free and will not usually have monthly repayments. You are free to do what you want with the money and can remain in your home as long as you wish. Some plans allow you to guarantee a portion of your home’s value as inheritance for your dependants. You can never be in more debt than the value of your home as the equity release plans come with a ‘no negative equity’ guarantee.

On the downside, this kind of plan reduces the value of your estate and it may affect your entitlements to benefits. You will also narrow down your options later in life. Compared with traditional mortgages, the interest rates on a lifetime mortgage can be high.

If you are interested in finding out more, there’s an equity release guide from Age Partnership available on the company’s website.

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Protect Your Assets When You Buy A House

April 19, 2012 By Danielle J

When you own a house, or more specifically, take out a mortgage in order to own a house, the mortgage lender will want to know that you have made provision to ensure that your mortgage will be covered if you get sick and are unable to work, or in the case of your death that the debt will be covered.

And during the process of making a mortgage application they’ll probably also offer you all kinds of insurance including income protection insurance, life insurance and critical illness insurance cover. Of course, you’re not obliged to take up any of these with the mortgage lender, you may have it all covered already, or you might be able to get a better deal elsewhere.

Whether you take up any of these insurance options depends on what kind of assets you have to fall back on in case of ill health. And of course, if you were to die, you’d want to make sure that your family’s finances were taken care of.

So, life insurance to cover the term of the mortgage is often a sensible idea. The best choice is probably to take term life insurance. This is where you set the number of years that the policy will run – and if you were to die during the policy period, the insurer would pay out. However, if you live beyond the term then you receive nothing. So, some people feel that you pay in to receive nothing at the end – provided that you outlive a policy. Of course, this is exactly the point of insurance – it insures you against the danger of dying before you have paid off the mortgage and leaving your family in the danger of having the house repossessed.

It’s important to shop around when looking for insurance policy quotes. Look for companies with good reputations like Suncorp – an Australian bank and insurance company that offers a whole range of personal insurance policies including critical illness insurance cover, life insurance, home insurance and car insurance. Suncorp life insurance pays a lump sum to the policy holder’s family on their death. Other life insurance policies work differently – with regular payments being made instead of a lump sum.

Whichever way you organise it – whether it’s through insurance policies or through invested savings – you need to make sure you have the ability to repay a mortgage should you die or become unable to work.

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Renting Out A Room – Make it Work For You

January 30, 2012 By Danielle J

More and more homeowners are considering taking in a lodger to help make ends meet. It can be a great way to tackle soaring utility and grocery bills or address the problem of being stuck in a house that’s too large for you but which won’t sell in a stagnant property market.

For this reason, renting out a room may be particularly suited to parents whose children have left home or people who have retired. But before doing so, it is crucial to ensure that your house is set up to accommodate both you and your paying guest. Don’t feel that you must move into your children’s old bunk beds to make way for your lodger! Sharing your house must not mean giving up your home comforts, otherwise resentment will set in.

While you may need to make some alterations, such as buying a new bed for your lodger (get some advice from a high street expert like Sleep Masters) or installing additional storage or cooking facilities, major structural work is unlikely to be financially viable. If you have to build an extension to accommodate a lodger, it’s probably not worth it. Think small. If the lodger’s room is in a basement with a disused separate entrance, consider reopening it. If you have a utility room in the basement, it may be worth adding a hob and microwave oven so that the lodger has somewhere else to cook. In the room there should be a double bed, wardrobe, chest of drawers and if possible a desk and chair. A television is desirable and most landlords also provide bedding and bed linen.

Demand is likely to be greatest if you live near a college, university or large employer. Although objections are unlikely, you should inform your mortgage company and insurers about your lodger. Most importantly, you should have a written agreement which sets out house rules and notice periods. Lodgers can turn out to be great friends and a welcome addition to the household but it’s wise to start off on a formal note.

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Mortgage Matters

January 30, 2012 By Danielle J

Six years ago, if you’d asked a conveyancing secretary, it was a matter of course that their clients would get a mortgage. So certain was the boss that in most cases, he would proceed as far as possible with the legal side of his client’s house purchase, safely able to assume that the mortgage was a given. These days, if you’re applying for a mortgage, it’s essential to do all you can to make yourself attractive to lenders as the climate has definitely changed.

Even though there has been a recent increase in the number of mortgages arranged, most lenders are still extremely cautious about who they will give a mortgage to. So if you’re hoping to enter the hallowed world of divan beds, fitted kitchens and major monthly outgoings, here are some tips:

1. Consult an independent mortgage broker. Perhaps the most important step in any mortgage application. Just like when you want to buy a bed, you’ll go to a specialist like Sleepmasters, make sure you get advice from an expert. A specialist broker will answer any questions about the mortgage process, help you hunt down the best deal and warn you about hidden loopholes.

2. Do your research. Before you start the application process, you’ll need a clear understanding of the mortgage market. It will be hard to feel confident that you’re getting good advice or a great deal, if you don’t know the difference between a fixed rate mortgage and a tracker.

3. Beef up your balance. These days, potential homeowners will need a sizeable lump sum before they can buy. To build up a deposit you’ll need to scrimp and save as much as you can, or perhaps you’ll be lucky enough to get a loan from the Bank of Mum and Dad. You could set up a direct debit to make sure that a portion of your salary goes into a separate savings account or ISA each month. Get the best interest rate you can, to make the most of your hard-earned money.

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The Overstated Importance of Location

January 30, 2012 By Danielle J

Location, location, location: the one true answer to buying or selling a home, or a worn-out cliché? While location is important, it’s not the “be all and end all”, and that’s a good thing for sellers because it’s the one thing they cannot change. If a property is in an undesirable spot, price and marketing come to the fore. Instead of dropping the price, a good estate agent might revamp their marketing strategy to include other positive aspects. If the price is right, and the package is marketed correctly, you can sell a house no matter where it is located.

Certain buyers may have particular needs that your property meets well, and which are more important than its location. For example, a potential buyer may have a disability and therefore favour houses geared towards this with wheelchair access, walk in showers etc. Other buyers may be looking for somewhere as a second home during the week so that they can avoid a long daily commute, in which case, proximity to popular secondary schools would not necessarily be a priority.

If you have a property which is partly suited to the elderly or people with mobility needs – such as a bungalow – and you wish to update these aspects prior to putting it on the market, it is worth getting some professional advice from an experienced firm like Mobility-plus.co.uk, as to what can be improved without undertaking a large, expensive project.

Before making any alterations to carpets, wallpaper or any other aspect of your home, it is worth getting advice from your estate agent as to what is worth doing and what is best left. Many sellers make the mistake of replacing their kitchen in order to modernize the home, only to choose kitchen units that potentials buyers don’t like and would want to rip out!

Filed Under: Home Improvements, Property Tagged With: , , , , , ,
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