HNW Couple, he 74 she 69, married in later life, bought large rundown property in the Home Counties. Children all grown up and financially well established (having benefited from the Bank of Mum and Dad already) with families of their own. Not concerned about leaving an Inheritance to the children, he is just concerned that younger wife is well catered for financially in the event of his death.
He uses all available savings and realisable investments (that do not carry a tax charge or disadvantage) to refurbish and develop the property, including building a swimming pool extension and 20Kw Solar Array with 40kw battery storage.
His pension fund is maxed out and now subject to 55% tax charge and his income is now subject to the top rate of tax. All other investments are also subject to tax charges on realisation. Property value is circa £2m.
Using a Lifetime Mortgage he raises £600k secured on the property at a fixed rate of 3.2% for the lifetime of the mortgage. He is not intending to pay the interest or capital. This will all be repaid on the death of both applicants or the previous sale of the property post first death.
These funds replenish his previously cashed in “investment funds” and repay the capital spend on their property. It will support their pension income without necessarily increasing their tax burden.
Looking to the future, in 24 years’ time, he will be 98 and the outstanding loan will be £1.2m including compound interest. It is impossible to speculate what the future property value might be but the future debt is equal to 60% of the current property value.
Whilst this release of equity reduces the value of the estate to be inherited it also reduces their IHT liability which is also substantial.
They have no intention of moving and have various other holiday properties. The grandchildren love to come and stay at the property and that is their main concern.
Getting a Tailored quote is the best way to see how much you can borrow and how much it will cost you.