Over 55 Buy-to-Let Options - James and Sophia


Over 55 Buy-to-Let Options case study: Helping first time buyers onto the property ladder

James and Sophia

  • Both in their early 70s
  • Own a mortgage-free Buy-to-Let property
  • Wish to gift money to two grandchildren

James and Sophia have owned their Buy-to-Let property for 25 years and now the mortgage is fully paid off. They have two grandchildren who they would like to gift some money to in order to help them get on the property ladder, but they want to keep the property for their own security and to continue receiving rental income.

Their property has increased in value from £120,000 in 1992, to £550,000 in 2017.

Traditional lenders will not lend to James and Sophia because of their age so they explore taking out an Over 55 Buy-to-Let mortgage. They’ve spoken to their grandchildren about the payment options, and the grandchildren suggested they would like to make voluntary payments to reduce the impact of interest roll-up.

By taking out an Over 55 Buy-to-Let Voluntary Select mortgage, James and Sophia can release £176,000 from their Buy-to-Let property and gift £88,000 to each of their grandchildren. They also retain their Buy-to-Let property for their own security, receiving a 4% yield (£22,000 per year annually), avoiding crystallising a capital gains tax liability of £120,400, and potentially benefitting from future house price growth. 

James and Sophia (or their grandchildren) can choose to make capital and interest repayments of up to 10% of the initial loan amount each year, without paying an early repayment charge, further protecting their future inheritance.

Key benefits:

  • James and Sophia’s grandchildren are able to put down deposits on their own properties through the released equity
  • They retain their income-generating property
  • Avoid selling fees and crystallising a capital gains tax liability
  • Complete flexibility to decide whether they want to make payments, how much they want to pay, and when
  • No threat of repossession (as long as they abide by the Terms & Conditions of the mortgage) 

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.

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