An article in the Telegraph last month stated that eight out of 10 first-time buyers get a deposit for house purchase from the bank of mum and dad, their parents. Well many parents and grandparents are sitting on a large asset, which is their home. Equity release could be used to raise some of the equity in the home to help their own children or their grandchildren get onto the property ladder.
One of the many uses of equity release is gifting to children or grandchildren and seeing them enjoy some of their inheritance while they are still alive. By raising equity from their home this gift could be used to fund a deposit for house purchase or a house move up market. Only recently it was announced that the average age of a first time buyer is now around 43 years of age. A gift of cash from the equity could help reduce this down.
Any release of equity would be free of income tax for the borrower, but could be considered a gift for inheritance tax purposes in the event of the borrowers death. You would be wise to seek independent legal advice before.
Raising equity on the property and using it to fund house purchase could be a good idea while UK property prices are low. Buy at a low point could mean if house prices rise again that significant equity gain in the new property could be very profitable.
Equity release used to fund house purchase deposit can be in the form of either lifetime mortgage or home reversion scheme and you should seek independent advice before committing to any product purchase.
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