Over the past half dozen months, a steady flow of negative, misery-inducing headlines have convinced millions of folks that the country is rapidly hurtling towards turmoil in a zero-emissions handcart.
In short, few people are content with our elected politicians. It seems that despite the understandably partisan euphoria that accompanied his arrival in Downing Street last year, in voters’ eyes, Sir Kier Starmer’s administration is no different to the last lot, or the one before that, or the one before that…you get the picture.
A combination of stubborn inflation, non-existent economic growth, unexpectedly severe tax raids on families and businesses, the hurried, insensitive removal of pensioners’ winter fuel allowance, coupled with a creeping realisation that a lengthy period of stagflation is upon us, have hit home. On top of this, the weather has been wretched; it seems that every time it rains, we have another ‘climate emergency’.
There’s little consolation knowing that across western Europe the situation is no better, and in some cases worse, than in the UK. Yet here, we’re also witnessing a steady exodus of both wealthy individuals in search of more accommodating tax regimes and warmer climes, as well as younger Brits applying to emigrate to countries as far afield as Australia, New Zealand and Canada. Who could blame them?
Estate agents also report heightened interest from older Britons wishing to establish a foothold on international soil, preferably in a country where the sun shines for more than a few months a year and the temperature is guaranteed to rise above 55F in July. Granted, there are potential pitfalls, especially in France and Spain, where onerous tax levies appear designed to actively discourage ‘alien’ investors. Thankfully, other nations are less obtrusive and actively encourage those willing to invest in their nation’s real estate.
Buying an overseas bolthole can be a complex affair and the timeless forewarning, caveat emptor, is rightly considered a cautionary phrase for those who believe the property buying process is a doddle. Your columnists can confirm from experience of buying and selling sur le continent that it most assuredly isn’t.
Nevertheless, provided buyers tread carefully, they can realise their ambition to become owners of an overseas property by going the whole hog and selling their UK home and investing a proportion of the proceeds in a new home abroad. An alternative, less dramatic option, which doesn’t involve selling the family home to acquire an overseas property, is likely to enjoy broader appeal.
According to recent statistics, around one third (31%) of UK adults have repaid the mortgage they used to buy their property and now find themselves sitting on an asset worth a considerable amount of money. Accessing a proportion of this money was once virtually impossible, but as lifetime mortgages have become more flexible, so their appeal has increased.
A lifetime mortgage, the most popular form of initiating the release of equity from the home, enables homeowners to access a proportion of the bricks-and-mortar wealth that has built up in their property, usually over many years. The cash proceeds (equity) are paid directly to the homeowner(s) and are tax-free. In many instances, the sums released are often sufficient on their own to buy an overseas property outright. Alternatively, a combination of the cash proceeds released from the home, plus a proportion of existing savings can be more than sufficient to acquire a property abroad.
Twelve months ago, my wife and I saw first-hand how this second option had worked for one couple when we took advantage of low, out-of-season air fares to visit Cyprus and enjoy ample quantities of warmth, vitamin D and the novelty (for March) of outdoor swimming while much of the UK shivered under leaden skies, low temperatures and snow.
We rented a one-bedroom apartment, introducing ourselves to the people next door over one of those early evening holiday drinks that slip down far too easily. Pleasantries out of the way, Carol and Dave,* the neighbouring baby boomers, revealed that they were on their third visit of the year.
“We haven’t won the Lottery,” advised Carol, adding: “we just decided we wanted to have our own place here. We’re over this week to sign some documentation and hopefully finalise the legal bits and pieces. Ideally, we’ll be proud owners of a duplex apartment (she clearly loved saying that) within a few weeks.”
An iPad was produced almost instantly, and we got to see the apartment in full glorious colour. Looking at someone else’s prospective home in the sun can be a bit like sifting through a stranger’s holiday snaps, but these were genuinely interesting, both for providing an idea of what you get for your money and how the purchase was financed.
You certainly get plenty for your money in Cyprus. Situated within walking distance of Paphos and the beach, the generously-sized (104m2), south-facing, two-bedroom, two-bathroom apartment – sorry, duplex – which Carol and Dave were buying was around ten years old, boasted sea views, a small private garden and covered parking. It was on the market at €155,000,(around £130,000).
As they had already told us they were retired, I asked, as diplomatically as possible, whether the fact that they were retired and, I assumed, were in their early-to-mid sixties, if there had been any problem financing the property purchase.
“None at all,” said Dave. “Given our age, we probably would have had to jump through hoops to get a regular mortgage from the bank, so instead we released equity from our home and added some cash savings we had with which to buy the place.”
“So that, in effect, made you cash buyers?” I ventured.
"Correct,” replied Dave. “And if you have cash in any market, you can drive a pretty hard bargain.”
We toasted the pair’s foresight (and did so again, several times, that night), not only for investing on Cyprus, but for buying their duplex apartment with tax-free funds released from their UK home.
“The great thing is, we never have to make a monthly payment on the sum we released from our house,” confided Dave, “so our only outgoings are utilities and property taxes.”
As is the case with hundreds of thousands of other folks who have benefited from equity release, the couple had used a lifetime mortgage as the financial vehicle to release the necessary equity from their home. Three of the lifetime mortgage features deemed most attractive are:
a) The undertaking by lenders (usually a large, well-known insurance company) that you will retain 100% ownership of your home until you die or move into long-term care;
b) There is no legal requirement to make monthly payments; although there is the option to make upto 10% voluntary payments per annum if desired
c) The funds you release from your home are completely tax free – and yours to do with as you wish.
Clearly, equity release can give homeowners a deserved opportunity to enjoy themselves and escape the depressing succession of desolate, cheerless news as often as they like.
If the prospect of acquiring a place in the sun by using wealth currently ‘stored’ within your home appeals, there could be great merit in speaking with an equity release adviser qualified to discuss the benefits and possible disadvantages of a lifetime mortgage; there may even be time to wax lyrical about your plans for enjoying your overseas bolthole.
In the meantime, why not check how much you could release here?
