12:23 PM, 14th July 2015, About 6 years ago
Castle Trust have launched a new Equity Finance product which allows landlords to restructure their finances for better cashflow.
Could this be another angle to offset the strains created by the summer 2015 budget? I think it might be, this is how I think it could work;
You pay down your existing 75% LTV mortgage to 50% and immediately borrow back 25% from Castle Trust, secured by a second charge.
Not all lenders will agree to a second charge as explained above but several of the bigger players including BM Solutions and TMW will agree. This is, of course, subject to your mortgage account having been operated in accordance with their conditions, e.g. you are not in arrears.
You continue to pay interest on your first mortgage but you make no monthly payments to Castle Trust whatsoever.
In 5 years time, or sooner if you decide to sell or refinance the property, Castle Trust take 50% of any capital appreciation based on the valuation of the property when you restructured and the sale or refinance valuation. They are not daft, if you contrive to sell the property below market value to a close friend or family member they have provisions for this, but that’s too much detail for this article.
Now my thinking is this ….
As the returns to Castle Trust are a share in the capital appreciation, will HMRC treat this as a share of capital gain, as if they are a joint venture partner? This has been a lot of speculation about this but we will not know for sure until a case is tested in Court.
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