- 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.
- 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
These case studies are worked examples and are for illustrative purposes only. Your customers will need to seek their own tax advice and you or your customers should not place any reliance on the figures illustrated in this case study.
Canada Life is not responsible for the suitability of any of the statements made in the case study, or for any financial advice you receive. 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. Figures and tax rates correct as at April 2017. Past house price growth is not a reliable indicator of future growth. The value of property may go down as well as up.
Find out more about our Over 55 Buy-to-Let Options.