The issue of costs that are the responsibility of the tenant?16:06 PM, 30th July 2019
About 3 weeks ago 49
Since reading two recent articles about Lifetime BTL Mortgages my head has been spinning with ideas, my conclusions from which I would like to sanity check with this superb online community.
As background; my wife and I are in our mid 70’s. We have a modest portfolio of Buy-to-Let properties worth circa £2 million and we live off the income they produce. We have no mortgages.
We have three children and six grandchildren, none of which are the slightest bit interested in getting into the property business. When we have passed on our estate will be sold and shared between them in accordance with our Wills.
My thinking is thus …
We take £800,000 of Lifetime BTL mortgages and gift that money to our children and Grandchildren so that we can see them enjoy it whilst we are still alive.
Our cashflow actually improves, because not only do we not have to service the mortgage interest, but we can claim tax credits to the value of 20% of the interest accruing every year.
The gifts we make to our family now will be Potentially Exempt Transfers, so if we live for more than seven years we will have reduced our exposure by £800,000 of value of our estate for inheritance tax purposes.
We appreciate the debt will be rolling up and will eventually need to be paid from the value of our estates, but that is not our concern. Time and value of money is far more important, and the improved cashflow and lower tax bills will be most welcome too. In any case, the increased debt will also reduce the value of our estate, so even less for the tax man.
There has also been a lot of talk about wealth tax, and if that comes to pass this could also help to mitigate that. This is because we will be less wealthy than we were before, on paper at least. However, the reality is that we will have improved cashflow as a result of lower tax on our seemingly lower incomes for tax purposes and the added pleasure of seeing our children and Grandchildren enjoying their inheritance before we have actually died. The inheritance pot will reduce but I don’t see why that should pose a problem. We never inherited anything and it isn’t a given right for anybody else to do so. If there is money left over at the end of our lives that’s a bonus for those who benefit from it. It seems we have an opportunity to ‘have our cake and eat it’.
It seems to good to be true, am I missing something?Show Form to get a Lifetime BTL Mortgage Quote
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