Asset Rich, Cash Poor?
Get your property working for you
While continued low interest rates have benefited those of us with mortgages, the same cannot be said for property owners relying on income from capital investments, many of whom have seen their income dwindle alarmingly. Drawing on capital to bolster today’s increasing standards of living is, in reality, a short term answer and to avoid eating up capital entirely there are ways our properties can help.
Over the years I have acted for clients who have solved their lack of sustainable income in a number of ways, could one be right for you?
You may choose to sell your property and downsize; buying a smaller, less expensive property, releasing capital and providing yourself with an income. But, it is not always an easy or acceptable option – there may be no suitable property in place you want to live.
The property itself may be the clue, rearranging it to accommodate a short term let can bring in a significant regular income. This is often a popular answer, especially if you live in an area where there is a lack of affordable rental property.
Is your property on a large plot? If so, is there scope for obtaining planning permission for development and selling part of the land without ruining the value and amenity of your property?
If those options are not suitable you may consider borrowing capital from family members and securing the loan, either with or without interest, by a mortgage on your property. This would be repaid when your property is sold. You may find this route preferable to borrowing from high street lenders that have toughened up their lending criteria over the last few years.
Age matters too. If you own a property valued over £77,000 and are over 55, you may consider an equity release loan. There are a number of providers and schemes available and the capital loaned can be used as you see fit, including home improvements, investing for income generation, or necessary purchases. The most popular scheme is a loan whereby your lender’s chargeable monthly interest is added to the capital outstanding, thus releasing you from monthly payments.
But, a word of caution, such schemes are a long term commitment with some significant downsides: they attract higher interest rates than a normal secured loan; they reduce the equity in the property capable of being included in your estate; they will reduce any government benefits received currently or may be in the future and you’ll pay financial penalties for early repayment.
To fully understand your options and choose the one best suited to your circumstances, always get advice from an independent financial adviser and talk it over with your family. Plus, for legal advice regarding raising capital ensure you contact a solicitor with the relevant experience and training .
All in all, if you are looking to invest in your future comfort, it’s quite possible you need look no further than your own front door.