A Home in the Sun

It is common for seniors to dream about owning a place in the sun. Miss Starkey is aged 70 and owns a three-bedroom house in Bournemouth. She moved there 10 years ago and bought at £45,000. It is now worth £185,000 and she has no plans to move again, as she enjoys living in the area and her circle of bowls friends. With only a sister as close family, she is not concerned about the lifetime mortgage (roll-up loan) reducing the value of her estate.

She wishes to raise the maximum lump sum - she can raise up to 40% of the property value (i.e. £74,000) and plans to use the money to purchase a holiday villa in Southern Spain. The plan provider points out that her English residence must continue to be her main home and be occupied as such. This is perfectly acceptable as Miss Starkey plans to spend the months of January, February and March on holiday in her Spanish dream villa, i.e. a maximum of three months at a time through the English winter.

The plan provider has an investment in Miss Starkey's main residence and will expect her to keep the property in good condition. This may mean, for instance, that the central heating might have to provide a minimum of heating if the property is unoccupied whilst she is in Spain during the winter months.

Gifting to the Grandchildren

Mr. Kingston is aged 90 and in poor health. All those years of painting and decorating when it was traditional not to wear a facemask filter, coupled with heavy smoking has caused severe lung damage.

Mr. Kingston owns a terraced house in Blackburn, Lancashire and it is valued at £80,000 and he wants to see his grandchildren enjoy the benefits of their inheritance whilst he is still alive.

Because of his age and health, he can raise up to 50% of the value and interest is only charged whilst the loan is outstanding. In consideration of his health, the lifetime mortgage (roll-up loan) is likely to offer better terms than a home reversion plan.

Clearing the Mortgage and Buying a New Car

Mike Evans and his wife Betty are in their mid-sixties. Their beautiful four-bedroom house in Maidenhead is a corner plot, which they bought in the mid-1980’s. They were very surprised to recently discover that similar properties in the area are currently selling for £560,000. They absolutely do not wish to move as they have a wide circle of friends locally. However, they are concerned about their mortgage, which is a £56,000 joint mortgage that they wish to clear before they retire.

The mortgage represents 10% of their property’s value. The Evans have been driving the same car for the last 15 years and have decided that it is time to pension off that vehicle and to purchase a new car as a retirement present to themselves.

The Evan’s are eligible for a lifetime mortgage, which allows them to defer paying the interest on a mortgage. The original loan and the accumulated interest are repaid on the second death unless they decide to sell or leave the house before this, for instance, to enter long-term care, in which case repayment is due then.

Mike and Betty see this as a win-win-win situation. They draw a minimum lump sum £85,680, which represents 17% of the property’s value. The proceeds of the lifetime mortgage are used to repay the existing £56,000 mortgage, leaving them with no monthly repayments and they are also able to buy a new car outright for £29680. The icing on the cake is that the lifetime mortgage debt now pulls their joint estate below the inheritance tax threshold (currently £255,000 per person), thus saving £20,000 in inheritance tax.