You may have more funding choices than you think!

by Simone Gilks (Mortgage Adviser)

13:56 PM, 15th January 2014
About 6 years ago

You may have more funding choices than you think!

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You may have more funding choices than you think!

Banks aren’t always the friendliest of places when it comes to borrowing money. All the “hoops” they expect you jump through, and even then you’ll be told what you can or cannot use the cash for! So it’s good know that you may have more options than you think. Let’s give you a working example: Simone Gilks

John, age 63, has his main residence with an outstanding interest only mortgage of £40,000 which is due for repayment later this year. He has a holiday home (mortgage free) in Cumbria that is used exclusively by him and his family, and he also has four “buy-to-let” properties (mortgage free) dotted throughout the town, and all producing good rents.

John wants to raise cash for various purposes including clearing his mortgage , plus money to help buy another new buy-to-let property, as well as paying for the world cruise he promised his wife 10 years ago! His bank is not being very helpful, so he has an interesting chat with one of our equity release experts.

It transpires that John could in fact use equity release to get cash from his main property and/or his holiday home, and/or his buy-to-lets, or any combination of the three. The cash released can be used for whatever purpose he likes, although the existing mortgage would have to be cleared, but that was part of his plans anyway.

Knowing his debt will increase was at first a concern, but John sees this as a reasonable compromise because equity release means no monthly repayments and so no impact on his income situation. In fact his disposable income will increase as his existing mortgage will be gone.

John is pleased to learn that the interest rate on the equity release loans would be fixed and guaranteed for life. He is told that these type of loans are also portable. This gives him the possibility to be able to move a loan to another property should he need to sell at any time without having to pay off the mortgage if he chooses not to.

Another benefit is the possibility of setting the interest against rental payments for tax purposes, although he knows this will depend on how the cash is used. So tax relief on the cruise is out of the question! Or is it? See this page about Landlord Tax.

John is now arranging a sit-down meeting at home with one of our fully qualified Beauwater financial advisers. John will be presented with written facts, figures and all the pros as well as the cons. John thinks: “That’s something else I never got from the bank … a home visit!”

Initial consultations are free so please feel free to get in touch and I will happily refer you to the most appropriate member of our team. We operate Nationally.

Contact Simone

Mortgages and Life Insurance


Comments

Some One

15:19 PM, 15th January 2014
About 6 years ago

Equity release for a 63 year old with 5 unencumbered properties?

Really? I think I would struggle to get that passed a compliance department.

Howard Reuben CeMap CeRER

15:37 PM, 15th January 2014
About 6 years ago

Reply to the comment left by "Some One" at "15/01/2014 - 15:19":

Hello Some One

This product is indeed available via any FCA authorised Adviser. To read the product information you can find it by 'googling' "Landlord Loan - Newlife"

Hope that clarifies.

Some One

15:48 PM, 15th January 2014
About 6 years ago

I know it's available and clearly I don't have access to the fact find, but my initial feeling is - only 63 - five unencumbered properties - lifetime mortgage? Run away fast.

Sue P

16:07 PM, 15th January 2014
About 6 years ago

Reply to the comment left by "Some One" at "15/01/2014 - 15:48":

I googled 'New Life Landlord loan' and I'm with you.
If anyone I knew was thinking of taking this type of product I would do my very best ot talk them out of it.

Why borrow via a 'interest roll up' product to pay off a domestic mortgage?
This chap has family - I guess they won't see any benefit from the property protfioio he has worked to build up over the years when he dies as everything will be used to pay off the debt.

I just can't see an up side to this...

Renovate To let

16:43 PM, 15th January 2014
About 6 years ago

Sounds like John needs to sit down and (re)define his goals and then build his strategy for 63-old age re the 3 taxes (IT, CGT and IHT).

Too much of his history and desired future outcomes is missing from the anecdote to know if this is the right option.

E.g. :
When were the BTLs were bought and for how much?
Personal income needs 63-old age?
Desires or not to pass on the portfolio as a viable business to his heir(s)?

The right plan can then be built to "manage" elimination of "bad" debt (personal house mortgage), portfolio growth, income, IT, CGT and IHT.

Mark Alexander

17:29 PM, 15th January 2014
About 6 years ago

Interesting discussion. You may be surprised to learn that my exit strategy is very much focussed towards being in a position to take lifetime mortgages. This put's me at odds with some of the people commenting above but I can assure you that I have given this a lot of thought over many years. See >>> http://www.property118.com/financing-beyond-retirement-age/

The cynic in me has to wonder whether some of the comments here are written by other advisers. Sour grapes perhaps? If that is the case, why not become a Property118 blogger yourself? This particular one borders on being slightly promotional it's fair to say but then Simone is also a great advocate and fund raiser for the Property118 cause too so that's a fair swap in my book. We are always looking for good writers who present us with interesting, engaging and debatable articles which raise awareness. See >>> http://www.property118.com/ever-thought-about-blogging-about-property-in-your-town/61985/

I have to applaud Simone for starting this discussion as it is clearly going to raise awareness to possibilities which many landlords will not have previously considered, and indeed some good questions relating to this financing strategy. Clearly it would not have been realistic for Simone to have produced an entire fact find outlining 100% of the circumstances behind the case study whilst keeping the the article interesting to the average landlord. Therefore, some of the critique is unjustified in my opinion. How do we know what has not been said?

Well done Simone for starting this debate and raising awareness. Lifetime mortgages and equity release will never suit everybody, that's because will are all unique. Wouldn't it be boring if we all lived in the same houses, drove the same cars and went to the same places on holiday at the same time of year? Funnily enough, my wife being Russian and having grown up in the USSR, that was the regime she grew up in 🙂

Keep up the good work!
.

Some One

19:00 PM, 15th January 2014
About 6 years ago

My exit strategy is repayment mortgages.

But I stand by my original statement (as someone who hasn't arranged a mortgage for a client for about ten years). Based on the facts as presented I know I would have struggled to get this passed a compliance department, and I would expect the compliance bar to be higher now than then..

Given the other properies I would expect a BTL mortgage would be possible to age 90.

Whilst lifetime mortgages are possible this early, I've come across people who, later in life regret taking them out so early. (The earliness generally lowers the max LTV available, without house price inflation the interest roll-up can start seriously eroding what's left to pass on, etc.)

Mark Alexander

19:11 PM, 15th January 2014
About 6 years ago

Reply to the comment left by "Some One" at "15/01/2014 - 19:00":

I agree that there are both pro's and cons to all forms of financing and even the lack of financing/gearing. As I pretty much said "horses for courses" 🙂

For what it's worth, just my opinion, this is why I don't agree with repayment mortgages >>> http://www.property118.com/interest-only-vs-repayment-mortgages/
.

Anon

20:55 PM, 15th January 2014
About 6 years ago

Asset rich, cash poor is more common than you might think for over 60’s who follow the repayment of all debts strategy their parents taught them. I’m an advocate of Mark’s strategy.

Mark Alexander

22:05 PM, 15th January 2014
About 6 years ago

Thanks for the supportive comments Anon. If this borrower was let's say 73 his options would be very much more limited but lifetime mortgages would still be an option. We don't know what options will be presented or which ones Simone's client will go for but given his circumstances then lifetime mortgages should at the very least be presented as one of the options in my opinion.
.


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