Wouldn’t you love to help?
Most of us would love to give our nearest and dearest a head start in life. And if your children or grandchildren are currently in a similar situation, you may be wondering how you could help them get their first house or flat. Depending on your circumstances, you could:
1. Buy a home for them to live in
If you have the money to do so, you could decide to buy a second home and let your children or grandchildren live in it – or you could become joint owners of a property with them. This means that the property would be in your name, or both of your names, rather than theirs alone.
2. Give them the money to buy a home
If you’d prefer to give a child or grandchild more financial independence and take responsibility for their own accommodation, you could decide to give them the money for a mortgage deposit – or top up the money they’ve saved for a mortgage deposit.
It’s also worth noting that, even if they’ve already managed to save enough for a mortgage deposit, making an additional contribution could give them access to more providers and better deals. It could make monthly repayments more affordable, or they could choose to shorten the repayment term.
How could you fund it?
If you’re considering helping a child or grandchild onto the property ladder, in an ideal world you’d already have a cash sum in the highest interest bearing account you can find – or a tax-efficient savings plan. You’d also be in a position to cash-in any funds invested in an ISA.
But what if you don’t have a cash lump set aside, ready and waiting to help your family? Well, if you’re a homeowner, it could still be possible to lend a hand by making the most of the value tied up in your property. Just make sure you seek advice before giving money away, so you fully understand the implications of what you’re doing.
Moving to a smaller, cheaper property is one way to release equity to help buy another property for a family member. It means you could pay off any remaining mortgage you owe, and then you could give any money left over (minus solicitor costs and other fees) to a family member.
If you don’t want the upheaval of moving, or you just couldn’t imagine leaving your home, that’s understandable. The options listed below could be more suitable for you.
Learn more: equity release or downsize? Remortgage
You could consider borrowing against the equity in your home by remortgaging. If you’ve been paying off your mortgage for a while, or you’ve paid it off altogether, you’ll have built up equity in your property over time – and you could borrow money against that equity to give to your children or grandchildren.
For older borrowers, though, it isn’t always easy to remortgage to release equity to buy another property. It depends on your circumstances and the individual lenders. For example, you’ll need to prove that the income from your pension would be more than enough to cover the repayments on the mortgage – to make sure it’s affordable for you.
Find out more in remortgage or equity release?
If you’re a homeowner aged 55 or over,
equity release is another way of releasing equity from your home to help buy another property for a loved one. That’s because a lifetime mortgage (the most popular type of equity release plan) allows you to tap into the value in your property without having to sell up and move.
With equity release, you can get hold of your money as a tax-free lump sum or in smaller amounts as and when you need them. Then the money is yours to spend as you wish – whether that’s helping a child or grandchild onto the property ladder, or keeping it for yourself.
Affordability isn’t an issue, as you don’t have to worry about monthly repayments (although it’s possible to make them, if you’d like to). Instead, your loan plus interest is repayable when your own home is sold, which is usually when you pass away or move into long-term care.
See how much cash you could unlock – try our free equity release calculator It’s an early inheritance
Whether it’s a full mortgage deposit or a boost to their savings, your gift could provide a welcome leg-up to your children or grandchildren when they really need it. One way to look at it is that you’re giving them their inheritance early – rather than waiting until you’re gone – and you’ll get to see the joy it brings to their lives during your lifetime.
That said, equity release isn’t right for everyone. So make sure you do your homework first. And you should always get advice from a professional before making any final decisions.
Helping the family with equity release
Take care of yourself
However you’re planning on helping a family member onto the property ladder, it’s important to take your own financial needs into account as well.
For example, if you decide to unlock funds from your home with equity release, you may want to use some of the funds to help make your retirement more comfortable. And then anything left over could go to your children or grandchildren.
Before you make any big financial decisions – including releasing equity from your home to buy another for your children or grandchildren, or giving their finances a boost – it’s important to seek advice from an expert adviser. They can also talk you through the possible inheritance tax implications of giving money away to your family.
The SunLife Over 55 Equity Release Service is on hand to help, so feel free to call to find out more.
How much money do you need in retirement?
Releasing the equity in your home is a big decision. It’s important to consider all of your options before deciding whether this is the right way for you to finance your plans.
You should always seek professional advice so you understand what’s involved and the fees you’ll need to pay. An expert adviser will be able to assess your personal situation and advise you on the best option for you.
For extra reassurance, you could get a specialist solicitor to explain your legal obligations.
It’s also important to include your family in the decision so they understand how it would work for you and affect them, particularly in relation to inheritance.