Over 55 Buy-to-Let Options - Ben

 

Supplementing income

Ben:

  • 72 years old
  • Owns Buy-to-Let property in London
  • Wants to supplement income by reducing existing mortgage payments 

Ben took out a mortgage of £100,000 on an interest only basis against his Buy-to-Let property in London in 2000.

The property has increased in value from £180,000 in 2000 to £600,000 in 2018. Ben currently pays £7,800 per year in interest payments and would prefer to stop making these and put the money towards his retirement instead. But his property can’ be remortgaged using a mainstream lender because he can’t pass their minimum income requirements.

Ben thought that his only option was to sell the property, until he spoke to his financial adviser who suggested an Over 55 Buy-to-Let mortgage.

An Over 55 Buy-to-Let mortgage allows Ben to release equity from his Buy-to-Let property to pay off his existing mortgage. There aren’t any affordability checks or minimum income requirements and Ben can choose to let the interest roll-up, which means that he can use the money to fund his retirement instead.

By choosing an Over 55 Buy-to-Let mortgage, Ben can supplement his income without having to sell his property which would crystallise a capital gains tax liability. He still owns an asset which produces in the region of 4% yield (£24,000 per year annually), and may increase in value over time. He has peace of mind because the interest rate is fixed for life and there is an indefinite term, but he still has the flexibility to sell the property and release the remaining equity in the future.

Key benefits:

  • Does not need to sell his property, which would crystallise a capital gains tax liability and create additional selling fees
  • Security of knowing that he does not need to make any payments, so all the net income (after tax) can be used to support daily living. He’ll receive an additional £7,800 before tax, £650 per month
  • No threat of repossession, as long as he abides by the Terms & Conditions of the mortgage
  • An indefinite term, so he will not need to refinance in his lifetime

Important information

This case study is a worked example and is for illustrative purposes only. We have taken care to ensure the information is accurate, but we accept no liability for any of the information we provide that you decide to use or for the suitability of any of the statements made. Individual financial advice and tax advice should be sought prior to taking out a lifetime mortgage, as releasing equity can change the inheritance tax position of the borrower and their estate, as well as potentially altering their eligibility for welfare benefits.

Find out more about our Over 55 Buy-to-Let Options.

Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority.

Canada Life International Assurance (Ireland) DAC is authorised and regulated by the Central Bank of Ireland.

Stonehaven UK Limited and MGM Advantage Life Limited, trading as Canada Life, are subsidiaries of The Canada Life Group (U.K.) Limited. Stonehaven UK Ltd is authorised and regulated by the Financial Conduct Authority. MGM Advantage Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority.