Homeowner loans ‘increasingly useful’

18th November 2007

Homeowner loans and other types of equity release could be growing in popularity as more people become subject to inheritance tax, it has been claimed.

Inheritance tax is levied against estates worth more than £300,000 when the owner dies - but with house prices having risen, more UK Homeowners are breaking through this threshold.

Equity release plans such as homeowner loans can release some of the value in the property to allow it to be passed to relatives as a gift - which can avoid incurring tax upon death.

Lucian Cook, director of residential property at Savills, comments: “You have this very, very significant increase in the number of people who are liable to inheritance tax.”

Britons whose children are in need of financial assistance may opt to use homeowner loans to “take some capital upfront on the house” and provide the necessary help, the spokesperson adds.

This could be useful even where a property is not high in value as there are fewer options to raise funds by downsizing at the lower end of the market, the expert notes.