Maximising the value in your home

Your home may have provided for you and your family for a long time. But it’s also the beating heart of your finances. In fact, if you’ve climbed the property ladder over the last 20 years or so and are in the fortunate position of having paid off a large chunk of the mortgage, you could well be sitting on a sizeable asset.

A few tips for maximising the value in your home
One way to come up with extra cash for retirement and other goals is downsizing – if you think you’d be happier, both financially and physically, in a smaller home. But do make sure you think it through so that the value you release from your house and the cost of running the new place work out to your advantage.

Rent out a room - Taking in a lodger can be a great way of generating income. If you rent out a furnished room in your home, you can receive up to £4,250 a year tax free under the government’s Rent a Room Scheme (correct for 2008-09 tax year). It’s sensible to have a binding contract with a lodger. You should draw up a simple written agreement outlining how much the rent is, when it should be paid, the notice period (one month is normal practice) and any other house rules, such as overnight guests etc. You should seek legal advice about the contract. Remember, too, to inform your insurance company and mortgage provider. And it’s a good idea to get your lodger to insure their own possessions.

Home improvements - Extensions, conservatories, redecoration and renovation not only make your home nicer to live in, but can increase its value, too. As a rough guide, a new bathroom can add £5,155 and a loft conversion can add £22,300. (source: GE Money October 2007, based on average value added). Move or improve your home podcast.

In short use these small steps in this guide to help you rethink your financial priorities:

• Sit down and consciously plan your key goals, for the immediate future as well as the years ahead. What financial changes need to happen to achieve them?
• Be selfish for a change. If children are no longer your most pressing financial concern, what is?
• Get serious about saving for retirement.
• Have fun. Yes, planning for the future takes work. But that doesn’t mean that life has to be boring.