Government Grants for All

Tax Features Of An Equity Release Mortgage

An Equity release is no more than a mortgage on your home that pays you for the equity that you have in your home when you reach retirement age. This is a very good way to increase the amount of money you get each and every month in your retirement. This will help greatly if your pension is not enough or if you did not save enough for a comfortable retirement.

The tax related benefits in a plan like this is well worth looking at. This alone can be a very good selling point for a plan like this. Not only will you enjoy the tax breaks, but your heirs will get some too.

Starting with the biggest tax benefit of all, any money that you get from a plan like this is considered to be tax free as it is only releasing money from your primary residence which does not attract taxation under UK Law. If you take the maximum amount of money at outset, it is possible release anywhere from £10,000 up to 50% + dependent on your age and property value.

Even if you are going to take the option that allows you to drawdown equity as and when you need it, the money you receive is still considered to be tax free. In fact it may also be possible to take an initial lump sum and also have a facility for equity release drawdown at a later stage.

For those receiving any means tested benefit from the government, you should note that if after drawing down a lump sum your combined savings are going to be more than £10,000 the pension credit, savings pension credit or council tax benefit may be affected.

As far as the benefits to your heirs, they could benefit by a reduction in the amount of inheritance tax that they pay. Because the property will be encumbered, there will be no inheritance tax on the amount that is borrowed against the property. If the remaining equity falls below the IHT threshold, it may even be possible to mitigate IHT all together.

This benefit will help greatly in many estates today. With increases in house prices over the last 10 years, property has significantly increased in price leaving many with a property value above the level where IHT is not payable. When it comes to paying inheritance tax, the Inland Revenue always wants their money, so being able to mitigate a potential IHT issue by using Equity release could be of great benefit to ones heirs.

As with all financial products, Equity Release Schemes have both pros and cons attached and should be considered carefully and preferably with the assistance of a suitable adviser. If you are age of 55 or over, own a home, and want to increase your income, this is well worth looking into.

Tags: equity, Features, Mortgage, Release

Investing – Home Prices fall in majority of the biggest markets

If you have owned a home, or any piece of residential real estate including condos, and vacation homes than you are aware of the run up in prices that occurred for a five year period that ended more than a year ago. In terms of investing, owning a home for half a century has been a wonderful way to build wealth. It is one of the few investing methods where you could actually live in your investment, while it increased in value. Most investors are not aware that from World War II until last year, there was never a single year where home prices fell on a national level, until last year that is.

Homeowners have counted on a steady annual increase in the price of the house they were living in to create a wealth effect. For many, it was their only source of forced savings. It was also a participation in the American dream – owning your own home, and living in it.

Studies are now available which show that at the end of last year, a number of housing markets declined. Actually, 149 different markets experienced the decline. Hardest hit were the East and West Coast of the US, and the Northeast cities.

In you were in Florida at all last year, it was impossible not to see thousands of super cranes going about the process of building 20 to 50 story condominiums. The vast majority of these condos were bought on speculation with the buyer signing the contract never anticipating the need to close on the contract.

We have not seen a mass number of walkways yet. These are people that signed non-recourse agreements with the builder, and are in a position to walk away from the agreement without having to write a check. They will forfeit the deposit they put down however.

Florida may well be the state taking the biggest hit in real estate. Sarasota was down 18% by year-end, while Melbourne was experiencing a 17 % decline. We are talking about actual prices being down. On a national level prices were down 2.7%.

Many analysts haven’t quite figured out what this means? Are motivated sellers holding onto residences longer in anticipation of getting their higher price later on? Are some sellers withdrawing their homes from the market, or perhaps not putting them on the market at all, awaiting prices firming up, perhaps later this year?

What about sales themselves?

In addition to prices being down, there are less actual sales taking place, which is leading to a larger inventory of unsold homes. Forty different states have reported a decline in the number of sales taking place. On a national level the number comes to a 10.1% decline in the actual number of homes being sold regardless of price. Three different localities have reported physical sales being down more than 30%. They include Nevada, Florida, and the District of Columbia. Virginia reported a 20% decline.

There were six states that reported an increase in the number of sales taking place – that’s six out of fifty. They included Alaska, Arkansas, Illinois, Kentucky, Mississippi, and Texas. There was no impact on Utah where sales were flat.

What you really need to look at is the VACANCY rate. The vacancy rate is the number of homes on the market where nobody is living in them, and they are for sale. On a national level, this number always seems to hover around 2%. At year-end, the number went to 2.7%. This is a massive increase because 2.7% is the highest it has been to in 50 years, and that’s only because they started figuring out the number 50 years ago.

You’ve got owners out there who are just waiting, and won’t sell at a lower price than the price they want. This accounts for the increased vacancy rate. On top of that you have another issue. There does come a point where a seller may have to sell. He will take what he can get, even though it establishes a new lower base from which everything else can trade.

Once this base is established than other buyers and sellers see it. The seller reacts with alarm. The buyer reacts with glee, but trepidation also because the buyer doesn’t know if prices are going lower still. This is how panic selling sets in, and no buyers. The buyers walk away, waiting for still lower prices

It’s the same as the stock market, sellers once they have seen higher prices, don’t want to sell at a lower price. Many prefer to wait, hoping, and it is hope that the price will come back. Only the forced seller will do the deal. It might be an estate, or divorce settlement, or a housing relocation that forces the actual sale. It doesn’t matter, once that sale hits the marketplace for all to see, there is a new adjustment in the real estate market.

Where’s the BIAS Now – UP or DOWN?

It is difficult to tell if the year-end numbers have wrenched out the secular excesses that have taken place in the real estate markets in the last five years while everything went crazy on the upside. There may be more to go. If you look at the stock market, most of the house builders bottomed out several months ago when they all made new multi-year lows. Since then, they have rallied nicely. If the real estate market has more to go on the downside, than these stocks will probably have to build double-bottoms before the decline is actually over.

If however, the vacancy rate picks up from here, and price declines have seen their bottom, than most of the damage is behind us. The economy overall and interest rate seem fine, so we don’t expect damage coming from a decline in GDP this year. What seems to be happening is that we are looking at a wearing down of the excesses produced since the late 1990’s in residential real estate in this country?

The geographical segments of the country that experienced the most increases in real estate prices are now the ones experiencing the declines. It’s the same story, and the story never changes, only the areas of the country being affected changes. Our work shows that prices, and vacancy rates have a way to go yet on the downside. At the same time, we believe the housing stocks may decline, but the absolute bottoms established months ago will hold. We are already off those bottoms.

Goodbye and Good Luck
http://www.stocksatbottom.com/ez.html

Tags: Biggest, Fall, Home, Investing, majority, Markets, Prices