2nd charge on Home question
Discussion
Currently i have unmortgaged House, but want to release equity for business investment, and one eye on IHT planning.
So, plan is to get (1) bank mortgage for say 40-50% limited because of my age (2) a company lends me money personally and takes a 2nd charge.
Aim, to pay "rent" by way of the 2 loans, and remove equity.
Makes sense ?
Thanks.
So, plan is to get (1) bank mortgage for say 40-50% limited because of my age (2) a company lends me money personally and takes a 2nd charge.
Aim, to pay "rent" by way of the 2 loans, and remove equity.
Makes sense ?
Thanks.
You may need to clarify that for meaningful replies.
I'll give it a shot.
If you have no mortgage than any loan you get secured by your house will be senior not 2nd.
In the States we have what's known as a Home equity line of credit, possibly the same in UK..
You only pay int on the amount you draw. You could of course draw the full loan amount on day one, making it very similar to a mortgage.
Nice flexibility to have.
I have an untapped one.
If you are going to use this for business expansion, I would make sure you can service it from your current cash flow..
If this is for a new business........I suggest proff assistance first. Business plan, realistic cash flow etc.
I didn't understand the "rent" bit, that would surely just be a wash
I'll give it a shot.
If you have no mortgage than any loan you get secured by your house will be senior not 2nd.
In the States we have what's known as a Home equity line of credit, possibly the same in UK..
You only pay int on the amount you draw. You could of course draw the full loan amount on day one, making it very similar to a mortgage.
Nice flexibility to have.
I have an untapped one.
If you are going to use this for business expansion, I would make sure you can service it from your current cash flow..
If this is for a new business........I suggest proff assistance first. Business plan, realistic cash flow etc.
I didn't understand the "rent" bit, that would surely just be a wash
big ant said:
Currently i have unmortgaged House, but want to release equity for business investment, and one eye on IHT planning.
So, plan is to get (1) bank mortgage for say 40-50% limited because of my age (2) a company lends me money personally and takes a 2nd charge.
Aim, to pay "rent" by way of the 2 loans, and remove equity.
Makes sense ?
Thanks.
So you plan to avoid IHT by leaving your equity to a mortgage company, rather than your family? That makes no sense whatsover. Doesn't sound much like a plan your family would thank you for, to be honest.So, plan is to get (1) bank mortgage for say 40-50% limited because of my age (2) a company lends me money personally and takes a 2nd charge.
Aim, to pay "rent" by way of the 2 loans, and remove equity.
Makes sense ?
Thanks.
With regard to the borrowing, mainstream lenders are going to be reluctant to lend for "business investment", which is potentially very high risk. Even if you could obtain such finance, a 2nd charge lender is not going to be able to lend much against 50% remaining equity, and the interest charge would be horrendous.
To be frank, one of the worst plans I've heard for a long time.
OK, so this 'idea' is part of a mosaic of steps to mitigate IHT.
My home will remain as such until death, so what I'm trying to do is retain the enjoyment of it, yet not pass onto the beneficiaries of my Estate, a dirty great tax bill.
So, thoughts were - to mortgage to say 90% of value, pay the mortgages as a pseudo Rent....and in meantime, Gift away or spend the proceeds of the mortgages.
Traditional lenders will probably only go to 50% LTV, so a secondary charge by an 'appropriate' UK Ltd Co. would raise debt to 90%.
Having watched a friend's mother 'waste' £800k - 1m+ in IHT, and the family home disappear, I wanted to enjoy for the foreseeable my home, but not pass on such a lovely debt.
That's all.
Most other IHT tools are being considered, a couple have been initiated (Life Insurance in Trust...), but the house is less easy to mitigate.
BA
My home will remain as such until death, so what I'm trying to do is retain the enjoyment of it, yet not pass onto the beneficiaries of my Estate, a dirty great tax bill.
So, thoughts were - to mortgage to say 90% of value, pay the mortgages as a pseudo Rent....and in meantime, Gift away or spend the proceeds of the mortgages.
Traditional lenders will probably only go to 50% LTV, so a secondary charge by an 'appropriate' UK Ltd Co. would raise debt to 90%.
Having watched a friend's mother 'waste' £800k - 1m+ in IHT, and the family home disappear, I wanted to enjoy for the foreseeable my home, but not pass on such a lovely debt.
That's all.
Most other IHT tools are being considered, a couple have been initiated (Life Insurance in Trust...), but the house is less easy to mitigate.
BA
big ant said:
OK, so this 'idea' is part of a mosaic of steps to mitigate IHT.
My home will remain as such until death, so what I'm trying to do is retain the enjoyment of it, yet not pass onto the beneficiaries of my Estate, a dirty great tax bill.
So, thoughts were - to mortgage to say 90% of value, pay the mortgages as a pseudo Rent....and in meantime, Gift away or spend the proceeds of the mortgages.
Traditional lenders will probably only go to 50% LTV, so a secondary charge by an 'appropriate' UK Ltd Co. would raise debt to 90%.
Having watched a friend's mother 'waste' £800k - 1m+ in IHT, and the family home disappear, I wanted to enjoy for the foreseeable my home, but not pass on such a lovely debt.
That's all.
Most other IHT tools are being considered, a couple have been initiated (Life Insurance in Trust...), but the house is less easy to mitigate.
BA
You will not be paying rent, you will paying a mortgage. If you then choose to gift the equity to family members, you will only be able to retain full enjoyment of the property if you pay a full market rent in addition to the mortgage payments.My home will remain as such until death, so what I'm trying to do is retain the enjoyment of it, yet not pass onto the beneficiaries of my Estate, a dirty great tax bill.
So, thoughts were - to mortgage to say 90% of value, pay the mortgages as a pseudo Rent....and in meantime, Gift away or spend the proceeds of the mortgages.
Traditional lenders will probably only go to 50% LTV, so a secondary charge by an 'appropriate' UK Ltd Co. would raise debt to 90%.
Having watched a friend's mother 'waste' £800k - 1m+ in IHT, and the family home disappear, I wanted to enjoy for the foreseeable my home, but not pass on such a lovely debt.
That's all.
Most other IHT tools are being considered, a couple have been initiated (Life Insurance in Trust...), but the house is less easy to mitigate.
BA
Do you not think that HMRC have seen every attempted IHT dodge in the book?
You need professional advice, it may well be that setting up a Gift & Loan Trust is the best option for you. A WOL policy in trust can cover the IHT bill, but will do nothing to reduce the bill in the first place. Forget these silly dodge ideas, they have all been thought of and closed off long ago.
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