Have you been saving and working hard to provide your children or grandchildren with the best education, only to find that fees have risen? Sound familiar? Did you know you can use equity release for private school fees?
We’ve outlined three types of mortgages that suit homeowners with different needs. Once you’ve read through them, get in touch for a detailed plan on accessing equity release.
A Lifetime Mortgage
If you are 55 or over, a lifetime mortgage is worth considering. This popular type of mortgage offers access to the equity in your home.
Some schools offer a discount if you pay school fees as a lump sum, while others promote termly rather than monthly payments. A lifetime mortgage allows you to take a lump sum, a fixed monthly amount, or access funds as needed.
This type of mortgage helps you support your children or grandchildren with their long-term education. There is no fixed term, and the lender does not expect the loan to be repaid until the youngest homeowner passes away or moves into long-term care.
Typically, the mortgage is repaid from the property's sale. Interest can be paid monthly or allowed to accumulate, meaning no monthly payments are required.
School fees are likely to represent only a portion of your property’s value, meaning you would need to release only a fraction of your property's value. This can make it easier to manage the financial commitment effectively.
This is a lifetime mortgage. To understand the features and risks, please ask for a personalised illustration. Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice.
An Offset Mortgage
Offset mortgages can make school fees more manageable, whether you pay them monthly or termly.
An offset mortgage links a savings account to your mortgage, offsetting some of the cost of your monthly mortgage payments based on those savings. For example, if you have a mortgage balance of £200,000 and savings of £50,000, you would only pay interest on £150,000 with an offset mortgage.
This is a good option if you have funds tied up in investments or rely on commission and bonuses for a significant portion of your income. This way, you can access funds for school fees while reducing the regular cost of interest payments.
A Second Home Mortgage with 90 Days’ Rental Allowance
If possible, you may choose to purchase a second home near your child’s school. Based on school term dates and holidays, you can split your time between the two properties.
Some lenders allow you to rent the property for up to ninety days a year under the terms of a second home mortgage. This type of mortgage can require as little as a 10% deposit, with affordability checks based on your income rather than rental income.
For more details on using mortgage finance to pay for school fees, get in touch!
Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. A fee may be charged for mortgage advice.
SPEAK TO AN ADVISER
Source: https://www.knightfrankfinance.co.uk/news/article/solution-to-rising-school-fees.aspx