we can't take it with us

"Tim Woodall" wrote

Aha - not "index linked" at all, then! :-(

somebody, possibly "Terry Harper" wrote (about me I think)

I beg to disagree.

Some people above have made more helpful comments and suggestions and I'm very grateful. If you are younger than me and IFAs then I suspect this sort of question/problem will be raised more and more.

Consider this please if you're still with us and interested (and I am sure it is an interesting concept):

Assume I have property worth 2m all of which I am using. It might be just one nice house here and one holiday home. (it's irrelevant that this is not the case).

Actuaries decide how long people will live. Let's say they advise a financial institution (FI) that I'm good for 20 years and to be safe they calculate on 25. (This is an insurance proposition after all, and they want to try to make a profit, fair dinkum. Maybe they'd be cautious and say 30 years but 25 for this example.)

They will also have an advisor to say property will appreciate by something (and it won't be -100% whatever some joker said above.) Let's say they calculate with extreme caution that 2m worth pr property today will be worth 3m in 20 years time.

Hence they could, interest ignored, b hand out 3m over the next 25 years (bear in mind they don't have the 2/3m in the kitty yet, I've still got that.)

if they gave me 3m/25 ie 120k each year for 20 years they would have given me an interest free loan.

So someone with a computer would calculate, just like with a 20 year mortgage but in reverse, what the annual payment should be (obviously a bit less than 120k. Then we want it inflation linked so the starting figure has to be reduced again (someone else with a computer!!).. Maybe it's 100k, I have no idea. At the end I have, as intended, nothing, it's all the property of FI. That's what I seek.

I would not know how to spend that sort of money (100k pa) so the charity waiting at the end won't go empty handed; but at least on retirement I would know what my annual budget is and what i can afford. health and nursing care insurance comes top of list, also maintenance of one or two properties if not self financing. The rest i could enjoy, leaving some change, surely, for the Essex Air Ambulance or somesuch.

let's pursue further! thanks mike

Unfortunately the comparable scheme over here looks like poor value for money. I believe that it's more widespread in France, with plenty of competition from individuals and finance companies which leads to better quotes.

See &

Daytona

In message , mikec writes

I think the nearest in UK is either a reversion (in which you 'sell' the property in part for a smidgeon) or perhaps an equity release mortgage. Northern Rock do one in which you neednt take a lump sum but draw a sum each month. Interest accrues on the debt as it rises as you drawdown in each month. The property is always yours, there is no tax on the withdrawals, and you only accrue interest on what you have drawn. the interest compounds and the debt increases. The interest rate is fixed but it can only be used for domestic properties that you live in yourself.

If you dont live in all of the properties, then why not try remortgaging for a buy to let type mortgage with drawdown.

Others have mentioned using annuities, but I cant see how it would be of much help to you.

What I suggest above incurs a cost of the interest charged, which is calcuable at the outset. The capital asset always remains yours but the mortgaged debt increases. There is no tax charge.

Whilst I have used the Northern Rock monthly cash plus before for clients, do shop around at the moment, NR's valuation and arrangement fees are excessive and their fixed rates are higher than most of the pack.

You are going to get a terrible return like this.

The calculations aren't that difficult to play with in a spreadsheet.

Column 1. Your Age. Column 2. Money withdrawn this year Column 3. Interest on money taken so far (this is the interest that someone who's given you the money would have earned for themselves if they kept it themselves) Column 4. Total value of money you've received so far.

I've assumed your income grows by 3% per year. So each row for column 2 = row above * 1.03

I've assumed interest at 5% so column 3 = column 4 from row above * 0.05

Column 4 = column 4 from row above + value from column 2 + value from column 3.

If you take 30k in year 1 at age 60, by age 90 the value of the money you've received will be >3m. If you or your wife live to 100 then the value of the money you've received will be >6m.

If you add in 20k p.a. (1% of the 2m initial property value) for maintenance then your looking at a value >3m by 85 and >4m by 89 for that 30k in year 1.

The unquantifiables are what value is someone prepared to gamble your house will be worth when you die and when you will die.

You actually need to factor inflation into this calculation as well. I think the effect of that is to reduce the interest rate in column 3 but it's late and I might be talking absolute rubbish.

Tim.

I've just realized why these numbers look so bad. With these calculations you are keeping the full value and benefit of the properties until you die. Therefore, on top of the 30k growing at 3% p.a. you'll also be getting any rental income.

Tim.