A helping hand for a daughter

By THIS IS MONEY
Updated: 19:00 EST, 16 July 1999

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I own my house outright. I am 80 years old and my income is £385 a month. I want to raise £10,000 to help my daughter. Can I do it and if so how? RH, Wantage, Oxfordshire.

Independent financial adviser Penny Onions says: There are various options but all have pros and cons and in many cases whether you qualify depends on the value of your home. Some lenders offer home mortgage schemes (also called equity release schemes) under which you are allowed to withdraw part of the value from your home. In some cases you pay fixed interest on the loan, in others you pay none until the property is sold or you die, when all the interest plus the capital is payable in one go. In other cases the lender takes a percentage of any rise in the property value during the term of the loan. Insurer Carlisle Life (01222 371 725) offers a scheme with a fixed interest rate, and Norwich Union currently offers a scheme but the minimum withdrawal is £24,000 based on 20-30% of the property's value. It charges interest at 2.9%, but note carefully - this is on the whole value of the property not just the loan - and it is rolled over until the eventual sale date when it all has to be paid at once.

Insurer Stalwart offer schemes which give you a lump sum, but in return for a large percentage of the value of your home, and you have to keep the property maintained to standards set by the company. However, if the value of your house is below a certain level it may only offer an income rather than a lump sum.

If your daughter can afford it, it may be a better idea for you to take out a pensioner mortgage (some lenders will consider offering one at your age) and making your daughter a guarantor, so that she pays the interest. Remember rates are low at present.

Remember also that you can only give away £3,000 a year (£6,000 if you gave nothing last year) without being liable to tax, and you have to take into account the tax implications if any arrangement you make. It is important that you see and independent financial adviser and/or solicitor before going ahead with any plan.