Over 55s and First-Time Buyers: An Equity Release Case Study

THE SITUATION

Martin and Sandra had owned their buy-to-let property for over 25 years and had fully paid off the mortgage.

They had two grandchildren they wanted to gift money to in order to help them make the leap onto the property ladder. They wanted to keep the original property and continue receiving rental income for their own financial security.

WHAT DID THEY DO?

Traditional lenders would not lend to Martin and Sandra because of their age, so they decided to explore taking out an Over 55 Equity Release Buy-to-Let Mortgage.

They spoke with their grandchildren about payment options and they suggested making voluntary payments to reduce the impact of Equity Release interest roll-up.

THE RESULT

By taking out an Over 55 Buy-to-Let Mortgage, Martin and Sandra released up to £176,000 from their buy-to-let property valued at £500,000. This enabled them to gift £88,000 to each of their grandchildren.

Martin and Sandra will retain the buy-to-let property for their own security, receiving a 4% yield (£22,000 per year) and avoiding crystallising a capital gains liability tax of £120,400. They will also potentially benefit from future house price growth.

Martin and Sandra (or their grandchildren) can choose to make capital and interest repayments of up to 10% of their initial loan amount each year without paying early repayment charges, further protecting their inheritance.

Key benefits:

  • The grandchildren are able to put down deposits on their own property through the released equity
  • Martin and Sandra retain their income-generating property
  • They avoid selling fees and crystallising a capital gains tax liability
  • They have complete flexibility to decide whether they want to make payments, choosing how much and when

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Joshua Jacob Later Life is not responsible for the sustainability of any of the statements made in the case study. We have taken care to ensure that the information is accurate. We accept no liability for any of the information we provided that you decide to use. This case study is for UK Professional Advisors only and is not approved for use with Private Customers. A suitably qualified Equity Release advisor is always necessary. Equity Release is not always the best choice for clients.