News/Events

How to make the most of your home's rising value [1st October 07]

The cost of buying the average home in the South West has risen more than four times faster than the wage of the average employee in the region over the past decade, according to the TUC recent analysis of official statistics. Their analysis showed that our house prices have gone up 4.8 times faster than pay!

Earlier Langtons articles have focused on the numerous people who are now liable to Inheritance Tax (IHT) mainly due to house price increases in this region and the possible ways in which to mitigate IHT to help you ‘keep it in the family’. As Bengamin Franklin said, “the only two certainties in life are death and taxes”. We do not know when ‘we will meet our maker’ if your estate value exceeds £300,000, the current threshold for IHT action should be taken now. For some couples a properly drafted Will can be the solution, others may require more complicated arrangements but you cannot start planning early enough.

The increased house prices have other negative implications for the region, not only to those now liable for this death tax. Our younger people are now struggling more than ever to get onto the housing ladder and afford the properties in the villages where they grew up. Those forced into rented properties are often paying rent which is equivalent to a standard mortgage repayment but even so, they cannot get a mortgage due to stringent income multiples and affordability calculations. I would certainly prefer that my clients are paying their own mortgages rather than someone else’s through renting. Your own mortgage is your savings pot, the largest asset that many of us will own which can be utilised in the future.

Many people, who are asset rich and cash poor, are using their increased home value to enable them to live more comfortably than the State pension allows and some to simply enjoy their retirement to the full, by releasing a cash lump sum or income. The product could be a life time mortgage or a home reversion plan and may not be suitable for everyone. Please ask for a personalised illustration to understand its features and risks.

Others who do not personally require financial assistance are choosing to release equity from their homes to help their children or grandchildren get on the housing ladder, pay for university or achieve other goals whilst they are still around to see them utilise their inheritance; For some this can have added benefit to effectively help reduce or remove any IHT Liability by reducing their estate value, so long as the parents / grandparents live for seven years, the money transferred to the children or grandchildren will be free of Inheritance Tax.

My comments in this article are based on current tax rules, tax legislation can and does change.

Langtons have produced a guide to Releasing Equity from your home; ask for your free copy without obligation.

Put simply there are benefits to the increased value of our homes and solutions to the problems it creates. An IFA firm will be able to provide advice on Inheritance Tax Planning, Mortgages for first time buyers, and Releasing Equity from your home. As initial consultations are usually free of charge if any of these issues affect you contact an IFA today.

This article was written by Langtons - Published in the Western Morning News, This is Money, 1st October 2007