Why your home is your biggest asset

Wherever you want to live, your house can provide for you, says Graham Norwood

Thursday 22 September 2011 05:33
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The average British home is worth £167,721, according to the Nationwide building society, making it potentially a nest-egg for retirement. There are several property-based options for home owners in later life:

Release the equity on your home, but stay there: There are two main types of equity release.

A lifetime mortgage is a loan that will provide income for the rest of your life, secured on your home. Interest payments on the loan are rolled up on top of the capital throughout the term of the loan. No repayments are made while you live in the property, but the loan is repaid from the proceeds of its sale when you die or move out. You retain legal title to your home while living in it but will face hefty repayment fees if you later decide to pay it off. The Financial Services Authority (FSA) regulates lifetime schemes.

Secondly there is home reversion. This is when an owner sells part or all of a home in return for a lump sum, plus the right to remain in it until he or she dies or moves. The size of the sum varies according to the age of an owner, likely life-expectancy and the market value of the property. The sum may be drawn down or used to buy an investment to provide income, or paid straight to the owner to do with as they wish.

When the owner dies or moves, the reversion company will sell the property, keeping the proportion originally bought, but repaying the proportion left to the deceased person's estate. Home reversion plans are not currently regulated by the FSA, so there is no formal protection. Rates here are still typically higher than for ordinary mortgages. These products also usually have high redemption charges.

Move to a specialist retirement development

The big advantage is that you move into a property tailor-made for people of your age, with adaptations where necessary and wardens on hand for older owner-occupiers. This does not mean you have to move from your locality, as these days there are numerous specialist developers - McCarthy & Stone, Beechcroft, English Courtyard and many others - that build across a range of communities.Most, but not all, such developments are in rural or coastal areas, but these days there is a lot of geographical choice, as not all retirees want to leave the city.

So, aside from lubricating the housing market, retirement developments in cities can be plain good fun for retirees. They have the chance to enjoy the theatre, restaurants and cultural facilities that younger residents take for granted.

Buy into a retirement development overseas

Retirement no longer means having to settle for uncertain British summers and a small flat in the West Country. The Government says that 871,000 Britons are now retired and draw their state pension while living permanently overseas - and perhaps as many again have formally retired abroad and are either below pensionable age or choose not to take a pension at all.

Most foreign retirement schemes are in Spain, although a few are in France, Italy and Ireland. In many it is possible to rent out your property if you do not use it year-round, although it is likely that only 55-plus tenants would be allowed.

In Spain, and in most countries popular with older Britons, there are ready-made English-speaking communities, if you retire to popular areas, with good health services which these days cater for ex-pats. If you're brave enough to start a new life abroad just as most of your peers head for the UK coast, the world is your oyster.

UK Council of Mortgage Lenders, www.cml.org.uk, 020-7437 0075; Financial Services Authority, www.fsa.gov.uk, 0845 606 1234

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