Today it’s extremely common for young adults in their 20’s and even 30’s to be either still living at home or in expensive rented accommodation. Although they would love a place of their own, the media is flooded with stories about generation ‘Y’ and their inability to afford extortionate deposits, leaving parents (aka ‘The Bank of Mum and Dad’) the only viable option for most millennials. The fact is property prices are at an all-time high, which is great for those who bought in the 1970’s and 80’s but a real problem for those hoping get their very first place now.
We met with financial expert Liz Murley, of Apex CB Financial Planning, to discuss how Equity Release (now known as Lifetime Mortgages) can help your children get onto the property ladder.
Who is Apex CB Financial Planning?
Managing Director Chris Ryan founded the business in 2004, having been in financial services professionally for 12 years, seeing an opportunity to develop a business focused on long-term relationships and a personal approach.
With 35 years in Personal Banking, Liz has developed a broad knowledge of all property related financials and is thoroughly competent and qualified in all matters Equity Release. Chris and Liz have a wealth of financial planning knowledge – with a combined almost 50 years of experience between them.
Apex CB handles everything you would expect from a fully independent financial advice business, including wealth management, investment, pensions and life assurance and now a full mortgage advice service. Together with Liz’s skills and experience, they are also pleased to offer a full advice service for Lifetime Mortgages.
Introducing Lifetime Mortgages
Equity release schemes of 20 years ago developed a poor reputation for being expensive, complex and in some cases involved selling your home for a discounted up-front lump sum. Today’s Lifetime Mortgages are very different and offer financial peace of mind in your later life, with borrowing costs at a historic low, and advice that is fully regulated by the Financial Conduct Authority (the financial industry watchdog) and covered by the Financial Services Compensation Scheme. It is the fastest growing area of the mortgage market with 27,534 new plans agreed last year raising £2.15 billion, according to Equity Release Council research.
The Bank of Mum and Dad
For many young people raising the deposit required to buy their first home can seem an insurmountable challenge. The high cost of rent makes saving impossible for many, trapping them in properties they can’t hope to own. The Halifax First-Time Buyer Review has found that the average deposit is now £33,000 in the South and £100,000 in London.
The baby-boomer generation has seen the value of their properties increase by on average 400% since 1993, contributing to the £5.1 billion raised in Inheritance Tax (IHT) over 12 months to May 2017, up 9% on the previous year.
For many parents and grandparents a Lifetime Mortgage provides a solution to help the younger generation get their first home without having to sell their home first, or giving away their savings or liquidating investments. Known as “inter-generational gifting”, money gifted as an advanced inheritance could help your family get a home of their own, and potentially save them a large tax bill too.
So how does it work?
Using a Lifetime Mortgage to release equity from the property provides a lump sum that can be gifted and, providing you live 7 years from making this gift, there will be no impact on your IHT nil rate band. Reducing the value of your estate by creating a debt is a legitimate means of planning, providing that the capital is irrevocably gifted away and there is no retained interest.
However, losing control of your money may have unexpected consequences in the future: Many company pensions provide a reduced pension for the surviving spouse, and then there is the matter of long-term care fees to consider too. So, a specialised type of financial plan known as a “Discounted Gift Trust” can provide a solution. This plan gifts away capital using a trust but allows the donor to take fixed regular withdrawals, and is suitable for those under 90 with normal life expectancy. It usually removes part of the capital from the taxable estate immediately, creating a day one tax saving for the family.
Chris said “We helped a couple in their 70’s achieved potential IHT savings of £240,000 by accessing equity from the family home and making an immediate gift to a Discounted Gift Trust for the ultimate benefit of the children and grandchildren. The regular payments from the Trust will be used to service the interest on the Lifetime Mortgage preventing the debt from rising, until they need the money for other purposes”.
Inter-generational gifting: the benefits
By reducing the value of your assets now you could save your children a potentially huge tax burden when you die. However for larger gifts in most cases you need to survive 7 years from the date of the gift, so if you are considering this you should seek advice sooner rather than later.
You can help your family when they need it most. As life expectancy increases children tend to be financially well established by the time they inherit, so giving them access to family money sooner may be of real benefit.
Lifetime gifting may also be a means of making a meaningful contribution to your grandchildren’s future, by paying for their education or paying off their student debt.
A Lifetime Mortgage can help you achieve these things by accessing the value of your home without having
How much could you borrow?
There are some age restrictions when it comes to actually taking out a Lifetime Mortgage: The maximum amount you could borrow is 50% of the value of your property (subject to a variety of factors). Say you’re between the ages of 60-70, in generally good health and your property is in good condition, you could borrow up to 35% of the value of your home. An individual analysis would be performed in any new enquiry, to give a specific percentage.
Apex CB: A Name You Can Trust
Apex has two fully qualified Equity Release advisers in Chris and Liz, and are members of the Equity Release Council, so you can rest assure that you are in the safe hands of their expert team. As an independent, family-run business, Apex CB understand the importance of being able to help your loved ones, which is why they work on your behalf to understand your circumstances and find the best possible solution for you and your individual situation.
The whole process always begins with a free, no-obligation consultation to explore your options. Apex CB will then get to work, undertaking extensive research of the market, to find a solution best matched to your individual needs. There are no secrets here; everything is laid out in black and white, no hidden fees or nasty surprises and they encourage the whole family to be informed throughout the process. Most importantly, Apex CB is there for you every single step of the way to make sure things flow smoothly. As an extra precaution with Lifetime Mortgages you must also receive independent legal advice and have plenty of time to reflect on your decisions.
For many people, easy access to capital just isn’t an option in later life a Lifetime Mortgage could be the answer so if this is something you have been considering please give Liz or Chris from Apex CB financial planning a call for a free initial consultation.
This is a Lifetime Mortgage, to understand the features and risks always ask for a personalised illustration.
For more information contact Apex CB Financial Planning Ltd on:
t. 01202 622223
a. Suite 2, Jellicoe House, Admiralty Park, Station Road, Holton Heath, Poole, BH16 6HX