1 / 24

Think of Your Exit!

Think of Your Exit!. Property Mentor Finance 20 th July 2013. Think about the Future. What are you trying to achieve? How much time do I have? How am I going to make sure it happens?. Think about the Future. KEY CONSIDERATIONS How many applicants on the mortgage Age of Applicants

coy
Download Presentation

Think of Your Exit!

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Think of YourExit! Property Mentor Finance 20th July 2013

  2. Think about the Future • What are you trying to achieve? • How much time do I have? • How am I going to make sure it happens?

  3. Think about the Future KEY CONSIDERATIONS • How many applicants on the mortgage • Age of Applicants • Income Tax Position • Planned Retirement Age and Income • Type of Mortgage Product • Mortgage Repayment Method • Mortgage Term

  4. Mortgage Repayment Methods • Interest Only • Part Interest and Part Repayment • Full Capital Repayment

  5. Mortgage Repayment Options Interest Only Your monthly payments only cover the cost of the interest of the loan • Pros – monthly payments are lower • Cons – you will still owe the full amount you borrowed at the end of the mortgage term

  6. Mortgage Repayment Options Part and Part Your monthly payment covers ALL the interest plus a monthly amount that will reduce SOME of the capital • Pros – Tailored affordable payments with some debt reduction • Cons – Mortgage debt still remaining at the end of the mortgage term

  7. Mortgage Repayment Options Capital Repayment A mix of interest and the correct amount of capital repayments to clear the mortgage in full at the end of the mortgage term • Pros – your house is yours debt free at the end of the mortgage term • Cons – monthly payments are much higher

  8. Key Objectives • Pay off your residential mortgage and protect your home • Buy investment properties that will produce income and capital growth • Income in Retirement • Inheritance Planning • Financial Freedom

  9. Paying Off Your Home Mortgage How can we do this? • Capital Repayment Mortgage • 10% Overpayments • Offset Mortgages • Inheritance • Use Other People’s Money (Tenant) • Sell it • Win the Lottery!!! 1 in 13,983,816 chance

  10. One Way to Pay Off Your Mortgage Is... • Use a Residential Offset Mortgage • We are seeing offset mortgages emerge now in buy to let too...

  11. Offset How Does It Work?

  12. Offset Mortgage Property Scenario • Loan size £175000, Savings £10000 and £100 pm, Current account balance £3000, repayment mortgage 25 years, 40% tax payer • Saved £6999 of interest! • Saved £4374 of tax! • Reduce 25 year mortgage to 19 years 1 month!

  13. Paying Off Your Home Mortgage • Linked savings pots to reduce mortgage interest charged • Drawdown without giving notice for deposits on new purchases • Daily Interest Calculation • Have linked current accounts to receive rent payments • Place rent deposits in linked accounts • Pay your salary in to a linked current account • Receive all rents on the 1st of the month and pay all mortgages on the 31st of the month!

  14. How Your Offset Might Look

  15. Buy To Let Lending Post and Pre Credit Crunch... • 2008 – Around 14 lenders left • 2013 – Over 60 Mainstream and Specialist Buy to Let Lenders

  16. Buy to Let Mortgages - Highlights • Minimum Age 18 • Up to 4 Applicants • Maximum Ages – • 4 No Max Age • 1 to age 90 • 3 to age 85 • 5 to age 80 • 16 to age 75 • Maximum Term 40 years

  17. Midterm Reviews • How long was the initial term? (Majority take 25 years) • How long is left on the current mortgage term? • Are there any products I can switch to with my lender? • Can I release any equity with this lender to buy more? • Would a remortgage be better?

  18. Midterm Reviews • Re-evaluate Cash flow • Would your property be suitable for conversion to: • An HMO • Flats • A B&B • Some existing rates are as low as 0.5% over base rate SAVE YOUR SAVINGS!

  19. Ownership Limited Company or Personal Ownership?

  20. Ownership • UK Limited Company, 2 Directors, both currently 40% tax payers due to retire in 15 years, 1 property making £8,000 per year profit • 20% Corporation Tax for the Company (£1600) v • £3200 Personal Income Tax if they take the profits • After 15 years there is an additional £24,000 profit in the pot which they can then extract when they retire, tax efficiently - how?

  21. Income into Retirement • When they retire they can defer taking their pension payments, this allows them the opportunity to withdraw the retained profits by way of dividends, the current tax rate is 10%. Their level of income can be set to keep the tax within the basic rate income band currently £34,370 each and pay no personal tax. • Capital Growth A company will pay 20% on any gain compared with up to 28% for individuals depending on their personal tax position, a company may also be able to claim extra allowances.

  22. Preparing to Exit • Personal Tax position at retirement • Identify the best property and use all available spare cash flow to pay off this mortgage • Work out a process of selling to maximise the capital gain allowances • Ltd Company Ownership consider Replacing Directors, or adding Shareholders to allow you to exit

  23. Preparing to Exit • Whatever your plan may be make sure you get the best advice you can afford to help you make all of these plans now and for the future the best they can be • Review your position regularly and adapt and change to the market, finance etc and discuss this with your advisers

  24. QUESTIONS Thank you for listening that’s my queue to Exit !

More Related