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  • Mortgages & Finance

    Equity Release Formula

    The reason I ask was if you are going to lend capital raised into a company it would have to be via a directors loan

    I am not sure how S24 effects ex pats so you will have to be careful how you structure your further purchases

    With S24 If you have no other taxable income you have limited space to stay out of s24

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    Learn Change and Adapt ?????

    Thanks d_l and sorry for my late reply!

    If I re-mortgaged to release equity before setting up a company, would this be different... I am considering remortgaging and then using the released equity to buy 3 or 4 properties, the 3rd or 4th of which MAY be bought within a company, but the first one or two in my own / wife's name....

    As you can gather I'm very much at the design stage of my strategy so I appreciate everyone's patience in responding to a newbie!!!

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    One thing you may want to consider is how much CGT you might have to pay if you sold the property. If you take out too much equity by remortgaging you might not have enough left to pay the CGT and that might cause a problem should things change and you need to sell.

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    Vanessa, you said:

    The formula most lenders work to is:
    Monthly rent x 12 divided by 5.5% divided by 145%.

    That does't make sense. 

    E.g. if rent was £1150, based on above, that would be 1150 x 12 / 5.5 / 145 = £17.30.

    Can you elaborate?


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    You forgot to allow for the percentages. It is 1150*12/0.055/1.45 = 173.040

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    Ahh of course! Silly me.

    Yes that sounds about right, I just did the calculation based on my recent additional borrowing, and the result is inline with this formula, although based on 125% not 145% as I am a lower rate tax payer. (is that assumption correct? 125% for lower rate?)


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