equity release examples

Unbiased Advice on Lifetime Mortgages and Reversion Plans
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Equity Release Examples:

Example A:

(Need for cash and additional income)

	Married couple: youngest aged 70
	Property worth £250,000
	Little or no savings but have pension income of £7,000 p.a.
	Desire to spend money on home improvements and enhance income

The Solution:

	Release £17,500 lump sum, and an additional monthly "income" of £325 pm using a suitable Lifetime Mortgage plan.
	£17,500 spent on essential home improvements.

Outcome:

	Home is improved, increasing its value and its enjoyment by its owners.
	The monthly "income" actually comprises a series of small loan increments. This carries no income tax, and the loan grows much slower than if a large lump sum is taken at outset.
	Lifestyle is enhanced.
	Note: It is important to check the effect such a plan might have on your eligibility for State Benefits.

Example B:

(Planning for IHT Mitigation)

	65 year-old widow
	Property valued at £500,000
	Value of total estate is £610,000
	Current IHT liability would be £124,000
	Intends to leave assets to her two children
	Wants to pay as little tax as possible
	Does not wish to sell her home

The Solution:

	Lifetime Mortgage creates £110,000
	The £110,000 is gifted to her children
	Children invest the £110,000 in an Investment Bond and this remains invested during their mother's lifetime

The Effect if no action had been taken:

	After ten years the value of the estate could be £994,000 (assuming 5% growth p.a.)
	The potential IHT liability could now be £244,000 (assuming the IHT nil rate band increases by an average of 2.5% p.a. to £384,000)

The Effect if Equity Release was used:

	After ten years, the value of the estate is reduced by the loan plus interest (£216,000)
	This results in a reduced IHT liability of £157,600
	Tax of £86,400 has been saved
	The value of the Insurance Bond is now £179,000*
	The total value of the net estate and the Bond has increased by £49,400

(assumes loan interest at 7% and net Bond growth of 5%)

The equity release products may involve lifetime mortgages or home reversion plans. If so, to understand their features and risks, ask for a personalised illustration.

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Registered in England and Wales Number: 5453659.

Financial Elite Limited is registered under the Data Protection Act 1998.

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