There are some big decisions to make when it comes to choosing what you want from your lifetime mortgage plan. The biggest question that is asked is:
Shall I take the maximum release?
Here are five good reasons that could help you to make this decision.
1 Mortgage Repayment
You’re over the age of 55-years old and you may want to be rid of the millstone around your neck and pay off your mortgage. As mortgage repayments are the major monthly commitment for many of us, loosening the noose around your neck is certainly going to make life easier for you. If you decide to take the maximum release from your lifetime mortgage, paying off your mortgage means an easier financial existence for you and your family.
This could be a beneficial decision for those who have an interest free mortgage and the endowment is not sufficient at the end of the mortgage term to repay the mortgage. On a lifetime mortgage plan there are no repayments and as you’re borrowing at a fixed rate with no monthly repayments, your maximum release could free you from this worrying problem. It’s a lifeline for those in the failed endowment situations and you will find that you have more of a disposable income stream which in turn will improve your quality of life. You will remove your largest monthly outgoing at a low interest rate which does not have to be repaid unless you die or move into long-term residential care.
2 Debt Consolidation
Debt has become almost a standard way of life and now is the time for peace of mind. You’re hitting your twilight years, you’re not working, yet you still have the debt of your younger years, and of course, there could have been times where you have had work difficulties such as redundancy and you have relied on other means to get you through some tighter times during your working life. Consolidating your debt with the maximum release now means you have some negotiating power with creditors. You may not get another chance to repay your debts without having to borrow more money at a later date which will have to be repaid. Maximum release is the ideal opportunity to free up your monthly commitments. With no repayments on your maximum release funds, it’s a financially sensible way to consolidate those debts that are hanging around.
3 Long-Term Care
Your health is an unpredictable area of your life and using the maximum release from your lifetime mortgage plan can enable you to remain in your home and pay for the care there rather than go into residential care. With services for home-care now readily available, options for remaining at home as long as possible are now better than ever. As long as you do not enter residential care, there are no repayments due on your lifetime mortgage.
4 Gifting to Your Children
Your children may need a leg-up on the mortgage ladder and gifting to children and releasing an early inheritance is a tax-beneficial way of assisting your children as they begin their own journeys into adulthood. You may be a grandparent and it is no secret that today’s financial climate is tough for young families. There are tax benefits to this arrangement and if you’re life expectancy is actualised at a few good years, an early inheritance gifted to your children will not be subject to inheritance tax if you do not die within seven years of the gift. Your maximum release cash injection could help your children out now and you also get to see the benefit of that inheritance.
5 Inheritance Tax Mitigation
As has been touched upon, inheritance tax is due on your estate and your estate will include your maximum release from your lifetime mortgage. You’re liquidising your assets and this amount of money is subject to inheritance tax should you die. Using the maximum release to clear yourself of your debts and enable your family to have something left over means some house-keeping of what will reduce your tax commitments.
The current threshold is £325,000 and this has been frozen until 2017/18; however, as can be the case, there could be changes in this tax law. It’s important to be aware of this. Anything left over from the current threshold is subject to tax at an eye-watering 40%.
Maximum release enables you to subsequently reduce inheritance liability on your estate in a legal way without any penalties. Technically, leaving money to members of your family other than your spouse means that you’re making the most of the tax-efficiency that is afforded to you. If you have a spouse, any assets which are passed to her/him will effectively count as a joint estate, therefore if you’re over the tax threshold, he/she after their tax allowances have come into effect could still end up with an inheritance tax bill.