Financial

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Your home is not just the place where you live. As property prices increase, some of the value of your home may be used to provide an income or a capital sum.

Remember that if you unlock part of the value of your home, you may be excluding yourself from means-tested benefits. To discover whether you qualify for Minimum Income Guarantee, ring the freephone number 0800 028 11 11. Contact your local council to discover whether you are entitled to council/housing benefits (the number if you live in Southend is 01702 215290).

The easiest way to release the value of your home is to move to a cheaper property. Disadvantages are the costs and upheaval of moving. You may also lose contact with friends. These problems apply particularly if you move to another town. Be sure to consider the availability of facilities such as shops, public transport, banks, library and clinic. Ask the local branch of Age Concern if you are in doubt.

If you decide to stay where you are, there are three options.

First, a simple legal document will transfer ownership of your home to a child, who can then pay you a monthly income. The advantage of this scheme is that the full value of your property will be passed to your heirs. Disadvantages are that they may incur Capital Gains Tax, the income may become problematic if you fall out with your children or if they run into financial difficulties, while the local authority may refuse to fund a place in a nursing home if you have given your home away.

Second are reversion plans. A reversion company (usually a bank or insurance company) buys between 30 and 100% of your home, usually for a lump sum, at its present value. They reclaim this proportion of the proceeds when your home is eventually sold.

Third are mortgage plans. A mortgage is taken out. Either the sum gained is used to buy an annuity, with interest being deducted from the monthly income, or income is rolled up and repaid with the amount of the loan when the property is finally sold. There should be safeguards so that the amount of interest cannot exceed the value of the property.
Both the second and third options mean that the full value of your property cannot be passed on to your children. As the company has a legal interest in your home, you will have to keep the property well maintained and fully insured. This may take a considerable proportion of the money released.

Members of SHIP (Safe Home Income Plans) have a voluntary code of practice as well as statutory regulation.

These schemes need to be discussed fully with relatives. You should also seek legal advice and independent financial advice. You may be charged for this.

Detailed advice is available in Using your home as capital by Cecil Hinton, published by Ageuk.  www.ageuk.co.uk It is available for reference at Southend Central Library.

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HELEN BROWN FINANCIAL SERVICES (0800 074 2684).www.hbfsonline.co.uk  

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