It’s possible we oldies are the last generation who were schooled in the ‘arts’ of woodwork and metalwork – I carved a wooden bowl (so close to the bottom that I had to stick a layer of ply underneath!) I remember it being caller a “treen” at the time and I’ve only looked up what that is now some 45 years later! (Treen (literally “of a tree”) is a generic name for small handmade functional household objects made of wood.) I also made a ‘fish slice’ that to this day sits in my kitchen drawer but is seldom used as the edge was never bevelled so it rather pushes whatever I fry into a crumpled mess rather than going under and allowing a satisfying flip!
Why mention my limited skills of decades ago now? Well, what it taught me was the confidence to use tools and tackle modest DIY (Sometimes Destroy It Yourself!) projects which certainly in my early homeowning years allowed me to improve properties, increase their amenity for me and subsequently enhance their value and act as an ongoing investment in a small apartment I still own and rent. Although I wouldn’t feel confident in major works even if I had the time I would/will feel confident in managing a project and doing some of the work myself. So why not think about improving your current abode rather than moving (More of that hopefully in a future blogs on ‘flipping properties as a way of increasing value and moving onwards and upwards even if only on a profit basis!)
Improving can mean more than a lick of paint or new carpet or flooring but could involve future proofing your existing property to include modifications that might allow one or other family member to live on the ground floor and access a bathroom and bedroom more easily. Neighbours of mine, so keen are they to always remain in their ‘forever house’ have reconfigured the top attic floor to allow a carer to have their own independent space whist keeping their own space and independence on lower floors. (Even elevator systems can without too much fuss be put into the corner of a room – space saving and often two walls to support!)
Modern technology has moved on from ugly stairlifts and now almost everything can be retrofitted thus avoiding having to move home. If you have the space then it may be possible to sub-let or ‘hive off’ an area as a guest wing or for a younger family member – I believe sound-proofing has come on leaps and bounds in the last few years! What’s that you say??
So onto David Forsdyke’s latest missive on how your dream house might be financed and asking the question:-
Why not look to improve rather than move?
In the UK the stamp duty holiday bubble has burst (Tax on buying a property and ranging from 3 to 8% of the cost. Mitigated in many cases by not having to pay capital gains tax on the increased value of your primary residence in the UK, unlike the USA for example.) the housing market is starting to settle down once again, and many estate agents are crying out for more stock as the supply of available property has dropped. If you’re thinking of moving home now you might struggle to find much choice. So maybe the answer is to improve and expand what you already have?
Here David Forsdyke, Later Life Finance expert at Knight Frank Finance, discusses how homeowners can use the equity in their homes for home improvements, and in many cases increase the value of their property.
Over the last 15 months the Covid 19 pandemic has encouraged many of us to make changes to our homes. Kingfisher, the owner of B&Q and Screwfix, said home improvements during the third lockdown led to a 42% jump in like-for-like sales compared with the same period in 2019. Total sales were up 22.5% to £3.4bn. Indeed it seems every day someone is telling me about;
• Redecorating and refurbishing the reception rooms now they are spending more time at home
• Building a new office space at the end of the garden, or modernising the study, so they can work from home more easily
• Redesigning the kitchen and dining area, and buying new equipment, now they’re eating at home more often.
• Extending into the roof with an additional bedroom, or repurposing the garage to create more living space.
In many cases these changes are adding value to the property and are a sensible investment, as the pandemic has made a fully modernised and well-equipped home much more desirable. Building a conservatory for example, can increase the value of your property by around 10%, while turning a garage into a living space, or adding a bedroom by converting the loft, can increase it by 15% (according to Property Price Advice Feb 2021).
However, if you don’t have spare cash available, raising funds for the latest home improvement project may not be as straight forward as it was 10 years ago. Remortgaging could come with a number of hurdles, as mortgage lenders have strict affordability rules and want the comfort that you can afford the mortgage payments well beyond your retirement. If you are over 55 they may only agree to lend to you over a short period of time because of your age, which can make repayments expensive. So what’s the answer?
A Lifetime Mortgage is a different kind of borrowing, which is only available to homeowners over the age of 55. Home improvements continue to be the most popular reason for taking out a Lifetime Mortgage, with over 60% of customers reporting this as the main reason for raising funds (Key Market Monitor January 2021), and there are a number of very good reasons for this;
A Lifetime Mortgage does not require you to make mortgage payments unless you want to. You can allow the interest to roll up on top of the loan, or you can choose to pay some or all of the interest each month, or make payments on an ad-hoc basis. You can even repay the loan gradually if you have surplus funds, as most schemes allow 10% or more of the loan to be repaid each year without charges or penalties. This means you can raise the funds you want, complete the home improvements, and then decide how much and how often you want to pay, if indeed you want to pay at all.
There are no affordability assessments, which means you can borrow the amount you need rather than worrying about how much your income will allow.
Lifetime Mortgages come with a number of safeguards thanks to the Equity Release Council, including the right to remain in the property for the rest of your life, and a No Negative Equity Guarantee, which means no matter what happens to the property market, you can’t owe more than the value of your home.
The cost of Lifetime Mortgage borrowing has fallen dramatically over the last two years. What once was an expensive option is now much more attractive. So, maybe it’s time to make that dream kitchen refit a reality, build that study in the empty space at the bottom of the garden, or convert the garage into a new living space.
If you would like to know more about how a Lifetime Mortgage could help you achieve your home improvements, talk to David or a member of his team by emailing firstname.lastname@example.org or by calling 01483 947764. David runs the Later Life Finance team at Knight Frank Finance and is a recognised expert in this field.
David Forsdyke, Head of Later Life Finance at Knight Frank Finance
T: 01483 947764