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Pensions And Long Term Care Why You Should Turn Again To Property
ost people have this plan uncertain area, and unless you
in life – they work for a have money or very vociferous
large (secure?) friends and relatives, you could
organisation, for 40 years or become victim of bureaucratic
more, and then they feel that the activities. As reported in the
organisation will repay their Telegraph Money section in
loyalty by providing them with February this year, a couple who
quite a sizable top-up to their had lived together since the
State pensions. beginning of the Second World War
( 65 years of togetherness) found
How wrong can they be? that when the husband had to go
into a care home, his wife was
Look at the chaos caused over the refused permission to move in
last few years on both sides of with him. Enforced divorce by the
the Atlantic where companies have Welfare state? Luckily the
either illegally or by bankruptcy couple’s family rallied to their
robbed hundreds of thousands of rescue, and Gloucester County
hard-working, loyal employees, Council relented and the couple
their right to a comfortable are now reunited.
retirement – Murdock and
Equitable Life in the UK; Enron, What is the common theme in this
IBM and now Delphi in the States reassurance that control of our
are just the tip of the iceberg. twilight years will not be taken
(Will GM be next…?) out of our hands by some faceless
bureaucrat?
Then there is another highly
relevant issue – that of long Financial insecurity of course.
term care. In the UK
particularly, human rights for In an attempt to overcome this
older people remains a very uncertainty, many people are
turning back to one of the That is what we are taught to do
bedrocks of financial security – in school, by our parents, by
property. society in general.
But to many ‘average’ people, the Very commendable – but what about
thought of investing in property our standard of living on
is seen as a privilege that only retirement? Or our choice of care
the very rich – and therefore homes when the inevitable
those totally unaffected by the happens? We may have a nice house
pension crisis – can afford to to live in, but if all of a
indulge in. sudden, we are only getting a
fraction of our usual income, due
However, many of these folk are to retirement or long term
already into property investment, illness, what happens to the nice
and don’t yet realise it. One car, the good holidays, the
thing most of us are brought up freedom to go and see all the
to believe is that we should, as family when we want to?
soon as we are able, get a foot
on the property ladder and buy Over the lifetime of the mortgage
our own house. But then it all the average property - wherever
goes a bit pear-shaped…. it is situated, has been
increasing in value by around 8%
Most of us live in this house we every year. With the average
have bought, usually with a price of a house in the UK now at
really low cost, long term £150,000, that represents a
mortgage, and we then have this growth of around £12,000 every
urgent desire to pay off the year. After 10 years, that will
mortgage as quickly as we can, so amount to some £120,000 (about
when we retire, we can live $205,000 to our US cousins), so
rent-free in our own property. you could have at your disposal a
lot of this money by refinancing However, there are organisations
your house. around who specialise in locating
property both in the UK and in
With the average deposit needed places such as Spain where
to buy another house as an properties can be brought for
investment in the UK being around very low amounts of money down,
15%, and the average UK home and for the uninitiated, full
costing £150,000, another house rental guarantees for up to 10
would require you to raise around years can be provided in some
£22,500 deposit, so in theory, cases. OK, there the trade off is
you could go out and buy and 5 that there would be little or no
more houses using the equity in rental income, but the mortgage
your existing house, and each would be paid with no worries,
house growing in equity by 8% and the capital growth after 5,
(£12,000 each per year), you 10, or more years would provide a
would see your net worth grow by very tidy capital nest egg
around £60,000 every year! indeed.
That’s all good and dandy, but But – and there is always a ‘But’
now you have 5 extra mortgages of – where there is money to be
around £127,000 each, each one made, sharks tend to circle, and
costing around £550 a month to before anybody rushes out and
service. This is what most people starts to buy low money down
find is still the most daunting, property, they should seek sound
and even terrifying prospect, of financial advice from an
investing in property. independent financial advisor.
About the Author:
Geoff Morris has built up a multi-million dollar property portfolio. He has a number of articles to help others follow their path to financial freedom. Visit http://www.propertyhorizons.blogspot.com
Read more articles by: Geoff Morris
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