Asset rich, cash poor - options needed

[Gertiefromnumber30]

We've been trying to sell our old flat for some months now, but flats are having a tough time selling in our area. We've reduced the price so it's now priced very keenly, but realistically are still looking at some months until a sale goes through, especially now we're going into August.

I'm quite newly self-employed having not worked for a while, and DH has become too ill to work. We've been living off a combination of my earnings and savings, but savings have dwindled to the point we need to get some finance to tide us over until the flat sells.

Despite having a lot of equity in the flat, which is mortgage free, we're coming up against so many roadblocks to getting a loan, because we can't show income - my earnings are lower than outgoings and are from self-employment.

What can we do? We can't get an unsecured or secured loan because of low income. Ditto a mortgage.

Options seem to be either a bridging loan - but these are very expensive and most seem to still want to see proof of income and have an end date that makes me uncomfortable. Or equity release - as DH is 60. Some lenders seem to still want to see income though, even though the LTV would be around 90% and I thought the whole point of these loans was for people to supplement income!

Hopefully the loan would only be for a few months and then we'd pay it off as soon as the sale went through, so either option would work out expensive in charges, but we'd be willing to swallow that to tide us over now. I'm looking for employed work too, but this could take time and still not pay enough to cover all expenses.

It's such a headache. Seems absolute madness we have all this money tied up but can't access it because of numerous hoops and obstacles.

Any ideas?

I'm assuming the flat you are selling isn't your primary home otherwise where will you live , will you incur capital gains on the sale.
Does the property you live in have a spare bedroom you could offer to a lodger .
Paid employment seems the obvious solution until things change .
Is your partner getting all the benefits he is entitled too , are you a carer, carer allowance ?

I really don't think bridging loans or any borrowing is a good idea because unless your flat is a central London mansion flat it's not likely to have huge value and money vanishes so quickly

I see his age what about pensions

Is it possible to rent out the flat?
Are you eligible for any benefits?

Thanks for your responses.

It's not our primary home.

The benefits will not be enough for us to live on. We have no spare bedroom where we are. He doesn't have a private pension, We could rent out the flat, but then there is a capital gains tax implication we'd rather avoid and because we have some debts we'd prefer to sell, as monthly rental won't be that much.

It is a London flat and there is lots of value in it. We just need to sell it, but that's not a quick process. We had a buyer who pulled out just before exchange, were it not for that we'd have been fine.,

Can you rent out the flat and rent smaller/in a cheaper area?

We’re not interested in renting, we only want to sell and just need some finance to ride us over until then. We’d only need about 10% of the equity in the property, which is what makes it so maddening. Basically, you can only get a loan if you don’t one.

Have you had quotes from companies such as We Buy Any House if you need money fast? I know those companies aren’t popular but I used one of them to sell my late father’s flat and actually ended up getting a really good price and cash was in my account within 10 days of contacting them.
It’s either that or a bridging loan and think of the fees as something you can’t avoid and take it out of the profit you’ve add from the flat.

Does anyone know if you definitely need to prove income for equity release? I thought the whole point of the loans was that you would not have to prove eligibility because the lender gets their money back plus hefty interest at the end from sale of the property? There ate no monthly repayments to have to afford. Yet a broker today has been asking about income etc.

We’re avoiding the we buy any house players at the moment because I gather they only give about 80%? We could drop the price for quick sale and cover bridging for less than that.

We’re avoiding the we buy any house players at the moment because I gather they only give about 80%? We could drop the price for quick sale and cover bridging for less than that

Remember to include estate agent and solicitor fees in your calculations.

Yes, that’s a good point. We have factored those in.

Have you approached a mortgage broker to see if they can offer you anything?

@Gertiefromnumber30 you need to speak to a Later Life Mortgage Broker

The equity release market has a lot of different options and I am pretty sure a good broker could find you a product suitable for your circumstances.

A friend of mine had a similar dilemma a couple of years ago. (Was selling and downsizing, the intention being to use the sale proceeds to buy a small property outright and leave a substantial chunk of freed up money to live on until retirement). She was rapidly depleting her savings waiting for the sale to happen and had no income at all, not entitled to benefits.

She utilised the money transfer facility on one of her credit cards. She was able to do a money transfer for £4k to her bank account (I think there was a 3% fee) which she was able to live on frugally for the 4/5 months it took to complete her house sale. Paid the credit card off straight after her solicitor transferred the sale balance to her.

As an existing customer she did it online, no additional credit check or income declaration etc. Thought I'd share in case this might be an option for you to consider.

Assume you're aware there is potentially already a CGT liability on the flat? It doesn't have to be rented out to be taxable, just the fact it's not your primary residency is enough.

Oh, forgot to say - it was a 0% interest money transfer for 12 months. So the only cost was the 3% fee as she paid it off within the 12 month period, and paid the minimum monthly payment due each month as required whilst the sale was happening.

would you incur CGT selling the flat?

I'm finding it hard to understand why you wouldn't rent the flat in your situation.
Do you and your partner own it jointly. If you earn so little, are you really likely to incur CGT if it is your principle source of income?
If it is mortgage free, is there a reason you can't move into the London flat?
Rental income in London is through the roof. It would be a shame if you were forced to sell a London flat when prices are so rock bottom.
Also if your partner had no pension, surely the rental income from London flat is the most important source of income you should safeguard.
Can you borrow money from family until you straighten other things out, like paid employment.
It would be great if you're able to expand on your circumstances, as I think it would help me to understand the situation more.

You won't get any means tested benefits due to the equity. Your dh can look at contributions based ESA and PIP if he is not already getting those as both non means tested.

Could you Airbnb the flat for weekends / short term rentals?

I'm guessing that perhaps the flat belonged to one of you, and you've moved in together?

I don't know if you're aware that you can rent it for up to three years without ending up being liable to capital gains tax? See the snippet I've pasted below. Also (but a bit more complicated to explain clearly) the CGT would only apply to the percentage of the time the flat was owned over and above the 3 years that it was not your principle private residence. So even if you went a bit over the 3 years the liability could be minimal.

If CGT is your main reason for wanting to sell rather than renting out the flat, I would definitely look at these exemptions further.

"there is a special PPR [principle private residence] rule that applies to all properties that have been your main residence at some time during your ownership.

What this rule says is that the last three years you own the property are always exempt from CGT. And it doesn’t matter how you use the property during those last three years.

In other words, you can move out of your home, rent it out for three years, and still not pay a penny in capital gains tax. (You will still need to pay income tax on any rental profits though.)

As long as you’ve lived in the property as your main residence at some point in the past (and during your ownership), you qualify for this tax break."

I wouldn't look to equity release in your situation because the fees for redemption are usually very high in the first few years.

If you are age 55 or over, you could investigate putting some of your remaining savings, (up to £2880 each I think), into an immediate vesting personal pension. You could each receive the 20% uplift added in tax relief to £3600. I believe this type of pension can be accessed as a lump sum straight away, depending on your income and circumstances. It would have implications for limiting future pension contributions so needs to be looked into thoroughly.
I'm not a financial adviser so please do your own research.

Get a credit card and use it for expenses and then just pay it off when you've sold

I got an Amex card with a £20k limit for a few months until I sold my house - was way cheaper than getting a loan

Private residence relief changed to the last 9 months in 2020 I think, so it’s no longer the last 3 years.

Thanks, we tried us but the guy kept asking for income details. Maybe we need a more specialist one. I thought he was one, though!