Equity Release

pinchmyself

I'm 57 married with a small private hire business running three vehicles with two drivers. My wife and I both work in the busines, but heavily rely on local authority contracts to sustain the business. The pressure on this sector makes it likely we will struggle to retain contracts after August of this year. This curently generates gross for the two of us around £24,000 p.annum as it is a partnership. We also have two properties we rent out. One , a flat which is unencumbered and generates £15,600 per annum, valued @ around £350,000, bought in 1989 for £85,000 and with 77 years left to run on the lease. It is reliable and has always been full. The other is a house with a £175,000 interest only buy to let mortgage costing £700 per month and generating around £7,000 per annum gross profit. We will also have an inheritance of around £120,000 available shortly and an endowment due out in January 2013 of anywhere between £75-85,000. My query is we live in a home, that has a £250,000 interest only mortgage on it, at very favourable rates, 1.5% over base ( that's why I have £120,000 in cash in the bank ) but that Mortgage is paid for through the income generated partially by the unencumbered rental propery. However firstly this is not tax efficient as I have no borrowing on it and cannot offset it against my tax. I have been advised that I could offset a loan to the value of the purchase price which is £85,000 however what would be the best method of taking this equity out. I would then have an amount of £120,000 plus £85,00o ( at some interest repayable ) plus £75-85,000 due in 2013 to invest....any ideas. I'd be interested to hear peoples thoughts and advice

TrickyDicky

My first thought is - how do you plan to pay off your mortgage on your home at the end of the term? sell the flat?

TrickyDicky101

I would consider extending the lease on the unencumbered property as it is getting to the point where securing a mortgage on the place will become much more difficult and thus your ability to raise a significant amount of money from the property is significantly diminished.

pinchmyself

Yes, I agree that thought had crossed my mind, however I did not consider it a situation that needed addressing at this moment, but as you so rightly say, if I were to sell the unencumbered flat i would need to increase the lease term to achieve the optimum price, however the freeholder is particularly difficult and I'd rather wait. Also I have a few options how to pay for my house....It's big with equity.......downsize as we get older......inheritance...in-laws are quite aged, wife and brother only ones to benefit...utilise the £120,000 cash, plus endowment....So I'm really considering sitting on the cash and see what happens, raise money on the unencumbered flat to the tune of £85,000, plus the £120,000 cash and endowment to buy another property with potential to live in when retired, whilst in the meantime renting it out. That is why I was trying to find out the best method of releasing £85,000 in equity from the unencumbered property.

rabbitmumu

if the freeholder is particular difficult, then there's a chance that they will ask for even more and being even more difficult in a few years time.... you really should sort that out asap especially you have spare cash at the moment.