Monday, April 22, 2024

How To Make Your Home Work For You.

March 15, 2016 by  
Filed under Money/Business, Weekly Columns

( If you’ve spent years paying off a mortgage, it’s nice to know that after a while your home can actually be made to work for you. Think about it, your home has been swallowing up money for years on end, and all those payments have amounted to a significant amount. What’s more, the price of your house has probably gone up in the interim, making it even more valuable when you sell.

However, getting at all that stored up wealth is sometimes necessary. Perhaps you need a new car. Perhaps you want a holiday of a lifetime. Maybe you need money to pay for your children’s college fees. So what can you do to make your home work for you?


If the kids have moved out of the home, one option might be to downsize. Downsizing isn’t necessarily a bad thing. In fact, you may find that as you get older, you’re less able to manage a large estate. And you may find that you simply no longer have a need for six bedrooms and four bathrooms.

Downsizing is a safe and effective way to release some of your wealth. You sell your larger house for a big sum of money. Then buy a smaller house, whilst pocketing the difference. Yes, it will cost quite a bit to move house. But given the aforementioned benefits, it is probably a good deal, depending on your situation.

Remember, if you are downsizing, to make sure that you can still accommodate all the items that you cannot live without. Start thinking about which possessions you’ll be able to keep when you move, and which you’ll have to get rid of months in advance of the move.

Use An Equity Release Product

If you don’t want to move, but still want to get hold of some of that cash saved up in the house, you might want to opt for equity release.

There are two main types of equity release. The first is called a lifetime mortgage. Under this scheme, you take out a mortgage that is secured on your home. The mortgage then releases a lump sum of cash to you to do what you want with. The benefit of a lifetime Excited New Home Ownersmortgage is that you don’t need to make any repayments whilst you’re alive.

You can mortgage any share of your household’s value. If you want, ringfence a certain portion of its value so that you have something left to pass on as an inheritance.

But the cost is that the interest payments on the mortgage can increase quite rapidly. The term used in the industry is that the interest payments “roll-up.” No, you won’t have to pay these while you’re alive, but they will severely impact the value of your estate after you’ve gone.

The other type of product is a so-called home reversion. Home reversion allows you to sell a part of your home to what is know as a reversion provider. They’ll then pay you either a lump sum or a series of payments over a longer period of time, depending on which type of product you choose.

However, if you do choose to use a home reversion provider, beware that you’re unlikely to get the full market value of your home. Typically, rates range between 20 and 60 percent of the market value of your house, so bear this in mind.

Fortunately, through this service you’ll have the right to remain in your property for the rest of your life. Or until you are moved into long term care. Thus, home reversion gives you peace of mind.

Another benefit is that it has something called a “no negative equity guarantee.” This means that if when your property is sold the outstanding amount is not enough to pay the loan, you won’t be liable for extra payment. So, if house prices go down and the reversion provider cannot recoup the value of the equity release, you won’t have to pay the difference.

For both equity release schemes, you have to be over the age of 55.

Rent Out Your Property

Renting out your property can be a tricky business. Landlords are forever fearful that their tenants will not cough up the rent.

However, there are ways you can fruitfully sidestep the issue. If you’re not a professional or commercial landlord, but just want a bit of rental income from your property, choose your tenant. If you know who your tenant is going to be, you can better assess their capacity to repay. For instance, you might be friendly with people who you know are in stable jobs and have their financial affairs in order.

Pick these people to put in your house. Maybe you could offer them a rate that is a little below the market rate for the peace of mind that these tenants will give you.

Of course, if you do end up renting out a property, it’s helpful to know a thing or two about the business before starting.

The first thing that you ought to do is work out whether you have time to juggle renting a property with any full-time job you may have. Often setting up a home for rent can be a time-consuming process. It can be a lot of work to deal with tenants and their needs.

When you plan to rent out your property, have a clear financial plan the spells out the costs of renting out the property. Also, ask around local estate agents to find out what the going rate is on a property like yours. Don’t forget to allow for periods of time in which the property will not be occupied in your financial plan.

Get A Lodger

Getting a lodger is becoming easier and easier. Under the UK government “Rent A Room” plan, individuals can earn up to £4,250 per year free from tax just from letting out a room. It’s all part of the government’s plan to try to make the cost of living lower for people at the bottom of the income distribution. By renting out a room, you’re really helping to provide affordable housing for tenants.

Plus, there are many flexible arrangements you can employ. Perhaps you live in a popular commuter destination and just need to provide a place to sleep Monday through Friday. During in the week you’ll have a lodger, but at the weekend, you’ll have the house all to yourself.

Rent Out Your Drive

Isn’t it strange how little we tend to think of our homes as a valuable resource for other people? But thanks to the market, we can put them to use.

One cool idea is to rent out your driveway. Granted, this probably won’t apply to many people, but if your home is fortuitously positioned, you could make a healthy income. Let’s say you’re right next to a transport hub, and the local parking lot charges $10 per day. Just undercut the local parking lot prices and sell off your drive space to a lucky bidder. If you can sell your driveway for $9 every working day, that’s $180 in your pocket each month just from parking. If you’ve got space for two cars, then you can double that figure again.

This is something that’s being done all over Britain in crowded cities right now. In Bristol, for example, people have made over £170,000 just from renting the driveways out to strangers. And it’s a wave that continues to grow each year, up almost 40 percent since last year. So why not get on board?

Staff Writer; George Long

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