P567ORACLE 567 Mon17 Feb C4 1714:54
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Unlocking the value
of your home
Are you elderly, living in your own
home, but finding it hard to pay for
heating or repairs? Your home can help
to boost your income, says Sue Gorska.
Anyone aged over 70, who has paid off
the mortgage on their home, can unlock
some of the money tied up in that prop-
erty by taking out a Home Income Plan.
You take out a mortgage on your home
and use the money to buy an annuity,
which guarantees you an income fgr the
rest of your life. Interest-only pay-
ments are made on the mortgage and,
when you die, the money raised by
selling the house pays back the loan.
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Your Money ...560 Holidays ...580
P567ORACLE 567 Mon17 Feb C4 1711:07
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Unlocking the value
of your home
You can't do anything you like with the
money from a Home Income Plan ─ it must
be used to buy an annuity.
As with any mortgage, there's tax
relief on the interest payments for a
loan of up to £30,000. The net interest
payments and tax on the interest part
of the annuity payment are deducted
before you get the annuity income.
The amount that can be borrowed varies
between 65% and 80% of your home's
value ─ usually up to a maximum of
£30,000.
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Your Money ...560 Holidays ...580
P567ORACLE 567 Mon17 Feb C4 1709:59
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Unlocking the value
of your home
The older you are the better when
taking out a Home Income Plan. Most
companies require you to be at least 70
or a joint age of at least 150 for a
married couple. The property has to be
freehold or, if leasehold, must have at
least 65 years to go before the lease
runs out. It must also be in a good
state of repair.
There will be legal fees and valuation
fees to pay when arranging the loan and
once you've bought an annuity you can't
get the money back. Moving to a smaller
house is possible providing the new
house covers the loan ─ if not you'll
have to pay some of the loan back.
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Your Money ...560 Holidays ...580
P567ORACLE 567 Mon17 Feb C4 1715:17
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Unlocking the value
of your home
You could opt for a home reversion
instead. The insurance company buys
your home outright then grants you a
lease to live there for the rest of
your life ─ at a nominal rent of, say,
£1 a month. You can do what you like
with the money.
Moving house is not possible because
the house is no longer yours to sell.
You can move out to live with relatives
though, and since the insurance company
didn't wait as long to sell the house
as they expected, they may pay a bonus.
The problem with home reversions is
that you lose any increase in your
home's value over the years.
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Your Money ...560 Holidays ...580
P567ORACLE 567 Mon17 Feb C4 1713:01
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Unlocking the value
of your home
A home is probably your most valuable
possession so think carefully before
taking out a home income or home
reversion scheme.
Inflation can reduce the buying power
of your annuity and you won't be able
to get your lump sum back. If the
interest rate you're paying on the
mortgage loan isn't fixed, your income
can go down if the rate rises. Will the
income from the annuity reduce any
means-tested benefits (eg.rate rebate)
you get? Non-taxpayers should ensure
the extra money doesn't mean they end
up paying tax.
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Your Money ...560 Holidays ...580
P567ORACLE 567 Mon17 Feb C4 1710:57
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Unlocking the value
of your home
Anyone interested in home income plans
should first get professional and
legal advice from, say, their bank
manager, solicitor or accountant.
An insurance broker can help with the
details of the schemes. Hinton & Wild
of Surbiton, Surrey, specialise in
this area or you could go direct to the
companies themselves ─ the Abbey
National and National & Provincial
building societies, Home Reveruigns of
Cardiff, Allied Dunbar Provident based
in London, Stalwart Assurance in Wimbl-
edon and Residential Home Reversions in
Worthing are amongst the companies
offering these schemes.
more follows >
Your Money ...560 Holidays ...580