In response to the evolving UK property market and with uncertainty in the rental market, some parents are exploring creative options to finance their children’s dreams of homeownership.

One such option is to release equity from their homes to offer an early inheritance to their children. This strategy could finance a house deposit, enabling the homeowner’s children to purchase a new property, or perhaps to buy a property they have rented for years. In this article, we’ll delve into the concept of equity release and how one potential use is for homeowners over 55 to empower their children on the journey to property ownership.

Equity release involves accessing the value held in a property without selling it and it may be one suitable solution to help homeowners over 55 achieve a variety of financial goals. One such goal may be for parents to access funds to support their children, perhaps to finance a house deposit.

I recently worked with a client whose daughter has been renting a house for the past 14 years. Now the landlord has decided to sell the house and this has created challenges for my client’s family, especially since her children are attending school in the local area. The cost of purchasing a house in the same area is higher than their previous rental payments.

To address this issue, “the Bank of Mum and Dad” kindly stepped in to assist. My clients made the decision to gift some money to use as a deposit for their daughter’s house purchase and to cover legal costs associated with the transaction, securing a stable living situation for their daughter and her family. This situation highlights the role that financial support from family members can play and the potential impact of changing housing market conditions on long-term residents.

5 important things to consider.

1. When investigating the later life financial options that may be available to you, it is essential to seek advice from financial experts, such as an equity release adviser or a mortgage adviser. If a Lifetime Mortgage is the right option for you, they will explain the features and risks, including how it will reduce the value of your estate and could affect your entitlement to means-tested benefits.

2. With a Lifetime Mortgage, homeowners can choose to receive a lump sum upfront or to access the funds gradually over time with a Drawdown product. This allows you to release an initial sum whilst holding some funds in reserve for access at a later date.

3. All lenders will allow a homeowner to make voluntary repayments, subject to the lender’s restrictions, which will reduce the total cost of the loan and accrued interest. This allows homeowners to have more control over the repayment of their loan.

4. Before considering equity release as a way to gift early inheritance, homeowners must evaluate their own financial future, including retirement plans. An equity release adviser will be able to provide a personalised illustration of how it might work for your unique situation.

5. Open communication within the family is vital. Clear discussions about intent, expectations and the details of equity release are crucial for a harmonious process. I feel it is important to include family members wherever possible, so that there is transparency about the value of your estate.

As the UK property market undergoes transformations, some parents are choosing to support their children’s aspirations of homeownership. By releasing equity from their own properties, parents may be able to offer an early inheritance that empowers their children to finance a house deposit and purchase a property. Through careful consideration and expert advice, parents can play a pivotal role in shaping their children’s future, providing stability and financial assistance in a dynamic property landscape.

If you would like to have a free non-obligation chat with me about this or to find out what later-life financial solutions may be available to you, please contact me at:

Mobile: 07837 025545

Email: karen.deighton@responsibleadvice.co.uk

This is a Lifetime Mortgage, which will reduce the value of your estate and could affect your entitlement to means-tested benefits. To understand the features and risks ask for a personalised illustration.
Any information contained herein is a personal opinion of the author and should not be considered to be advice of any kind. Inheritance Tax planning is not regulated by the FCA. Think carefully before securing other debts against your home. By consolidating your debts into a mortgage, you may be required to pay more over the entire term than you would with your existing debt.
Responsible Equity Release is a trading style of Responsible Life Limited. Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (https://register.fca.org.uk/) under reference 610205.
Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,690. Our adviser will talk through the setting up costs of a Lifetime Mortgage before you make any decision to proceed.