Personal Finance
Newcastle Herald
Thursday January 15, 2009
Q My retired single mother-in-law is on a pension and owns the house she lives in outright. She has only $8000 cash left in the bank and requires funds for a car, as well additional living expenses. The house is valued at $400,000. Is there a way to draw an income/loan out of the house without reverting to a reverse mortgage option? Her living expenses per annum would be about $10,000. Can you please advise on what options are available to her?
A There are a number of strategies to release part of the equity in her house and these include a reverse mortgage and also a scheme where a fund manager buys a portion of her home. I favour the reverse mortgage because of its simplicity, but you should keep the amount as low as possible and make sure she clearly understands that the debt will increase each year if the interest is allowed to capitalise. A way to prevent this is for the family to pay the interest because they are the ones who will receive less from her estate if the house has a large debt on it when she dies.Q We owe $140,000 on our primary residential place, worth $300,000. We would now like to buy land and build a home to live in within the next few years. If we buy this land as an investment property now, for the purpose of claiming interest, buying costs and maintenance fees, do we have to pay CGT when we start building in two years time?A You do not pay CGT until you dispose of a property, so building on it will not create a CGT liability. However, if you move to the new place when it is built, and retain the original home, you will be liable to CGT on any increase in the value from the date you move out.Q My grandmother recently passed away and left her only asset, her home, to my mother and her sister. My partner and I have offered to buy the property. My mother wants to give/lend us her share of the property and we will borrow the money for the other half from the bank. What would be your advice?A Take advice before you act because your mother's aged pension entitlements could be adversely affected if she is of pensionable age or within five years of it. Also, I suggest you look at what other properties are available if you decided to sell the property that has been left to you. This would give you much greater choice.Send your questions to noelwhit@gmail.com.
© 2009 Newcastle Herald