To sell or not to sell, that is the question...
What are your choices? Even though there has been a slowdown in the economy recently many have done very well over the past few years. You are retired. Your mortgage is paid off. Your family home is worth more than you ever could have dreamed was possible. But you are still living on a modest income. If you are lucky, you are comfortable but you long for more. You would like a holiday home, a new car or you would like to travel the world. Your family are independent and don’t need your help but in the long term they are the ones to benefit from the equity in your home, not you. Is there a way in which you can generate more cash without leaving yourself in a detrimental position?
The easiest option for many is to sell the large family home and downgrade to a home which is smaller and more manageable. This will hopefully generate enough cash to allow them to enjoy their retirement whilst still having the security of owning their own home. However, there is often a reluctance to do this as family homes contain many years of memories which people can be reluctant to let go of. The other major downside is the necessity of having to pay stamp duty unless you buy a new property of a certain size.
Is there another way? Financial providers have been quick to spot the gap in the market and there are now a number of products which all result in a release of equity in return for a sum of cash to be used by the individual in whatever way they wish. For many this seems like the perfect solution as you are still in your own home, but is it? These products are far from ideal. There are two main types of products. The first type results in a mortgage being placed over your property and the sum borrowed, in most cases, does not become repayable until after your death. The second type of product involves you selling a percentage of your house to the financial provider in return for the sum of cash. If you are considering any of these products you should read the terms and conditions very carefully and get advice on them. You should bear in mind that interest rates tend to be higher. You could easily find that the sum to be repaid grows quickly and there may not be as much equity left in your home as you would have expected. If you change your mind it can be expensive to pay off the borrowings or buy back your share during your lifetime. You should proceed only with extreme caution.
The other way in which you can generate equity in your home is by entering into an arrangement with a family member. You could borrow a sum from a family member and give them a mortgage over your property or in fact sell your property to them and reserve a right to stay in the property for life. For many people this is the ideal compromise and keeps the property within the family. In some cases however, this in itself can cause acrimony between family members and the idea never gets off the ground.
If you find yourself in the lucky position of having to consider these dilemmas it is important that you make your decision based on what is best for you. It is extremely important that you ensure that you will have sufficient means to pay for nursing home care in the future if you need it. The easiest option by far is replacing your large family home with a smaller model and using the excess funds to live comfortably and independently. After all, memories travel well and will still be the same whether you are in your large family home or on a cruise ship sailing through the Caribbean!
Jackie Buckley
Partner
jbuckley@hayes-solicitors.ie