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.
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.
- 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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