Private School fees are currently in the news with the planned removal of the VAT exemption, and with the average fee for a day pupil now just over £17,000 a year for an 11 year old, many people are looking at efficient ways of meeting these burgeoning costs.
Grandparents who own their property could potentially assist their grandchildren in meeting these additional costs by the careful use of a suitable equity release product, such as a Lifetime Mortgage.
Contrary to popular belief, some equity release products, such as Lifetime Mortgages do not have to be set up to access one large lump sum. They can be arranged so that a series of much smaller lump sums can be taken each year, which could be a good way to meet the cost of the private school fees and mitigate the interest payable overall.
For example, on a Lifetime Mortgage, usually, interest is only charged on amounts that have actually been taken (i.e. "drawn down"), so borrowers can plan carefully how much they take and when they take it, thus only paying interest on the sum taken ("drawn down").
Further, having a debt against the property can in some cases also be an efficient way of providing for intergenerational gifting, especially as part of a wider financial planning and Inheritance Tax mitigation strategy.
Here is just one example of how it could work:
Mr & Mrs McDonald are both 75 and would like to help their son and daughter-in-law who are sending their granddaughter, who is aged 11, as a day pupil to a private school.
Fees are £17,000 per year. They own their home outright, and it is valued at £900,000. In this example, a Lifetime Mortgage could be obtained to provide them £17,000 to cover the fees for the first school year, together with a reserve facility of say £200,000 that can be arranged in this example, so that the grandparents can draw down further sums incrementally to cover costs in subsequent years.
Equity release is not suitable for everyone and is a complex arrangement that affects inheritance.
The most important thing to bear in mind is that we can tailor each plan specifically to meet your personal needs after understanding your family dynamics, financial circumstances and overall objectives. No two family situations are the same. We specialise in providing bespoke advice that will meet your individual requirements.
We will listen to what you want to achieve, understand your financial circumstances and then inform you as to whether an equity release product, such as a Lifetime Mortgage is a good solution for you in your particular set of circumstances.
Why not give us a call today and find out?
0333 34 44 34 8
The information provided in this article is not intended to constitute professional advice and you should take full and comprehensive legal, accountancy or financial advice as appropriate on your individual circumstances by a fully qualified Solicitor, Accountant or Financial Advisor/Mortgage Broker before you embark on any course of action.
Comments