CASE STUDY: MRS O'REILLY FROM DORSET
Here is Mrs O'Reilly. She is:
• She has suffered a stroke and her children live 3 hours away from Sandbanks, Dorset;
• Her children are concerned that if she has further medical problems, she may need to move into residential care;
• The average cost of a care home in her area is £1,000 per week, which is not affordable to the family;
• Traditional lenders will not lend to Mrs O'Reilly due to her age;
• Her children will be forced to sell her property to fund her care;
NEEDING CARE BUT HOW TO FINANCE IT?
There is a range of Buy-to-Let Mortgages for over 55 years olds which would enable Mrs O'Reilly to raise finance against her property to fund her care.
Her property is worth £250,000 so she can raise up to £110,000. She can raise the fund for her care in one lump sum, or can borrow a smaller amount up front and borrow more in instalments by taking out further advances when required.
HOW DOES IT WORK?
- Mrs O'Reilly could supplement her income to cover her care fees by converting her main residence to a buy to let property.
- She can afford to pay for her care and still pass on her family home to her children.
- She can enjoy peace of mind as she knows the loan does not need to be refinanced during her lifetime.
- She does not incur any property sale costs.
- She owns an asset which generates ongoing income.
- She and her estate may still benefit from future capital gains on the asset (subject to the impact of interest rolling up).
- She, and her family, still have the flexibility to sell the property and realise the remaining equity in the future.
- If her health recovers she can take out a residential lifetime mortgage and repay the outstanding mortgage.
If Mrs O'Reilly takes out an Over 55 Buy-to-Let Mortgage she does not need to make any repayments, and can use all the cash she has released to fund her care. By taking out this Buy-to-Let Mortgage Mrs O'Reilly has the additional safeguards:
- No threat of repossession (subject to abiding by the Terms and Condtions).
- An indefinite term, so she will not need to refinance before she dies.
- The security of a fixed interest rate for life.
- The certainty of fixed early repayment charges.