Let’s be honest, life is not as simple as it once was, and for the millennial generation, we have entered the age of renting.
In today’s global economic climate, fewer young professionals are being forwarded the opportunity to purchase a property, and gone are the days of children having a home with a big garden.
Considering this, one of the greatest gifts that a parent can give their children is assistance with purchasing a first home.
But, if you don’t have large amounts of savings, is it possible to gift your children with an early inheritance to purchase a home? Let’s take a look together with John Lawson, an Equity Release Expert from www.sovereignboss.co.uk.
How Much Equity Do You Need to Buy a First Home?
The average first home in the UK costs around £260,000. However, your children will generally need between a 5% and 25% deposit to qualify for a bond.
If you can’t afford to cover the full cost of the home, then giving them the money for a deposit will be an amazing boost to set up their future. Furthermore, there are currently no tax implications for gifting your children with a deposit.
Will a Mortgage Lender Be Happy to Take a Deposit from a Family Member?
Yes, a mortgage lender will always be happy to take a deposit from a family member. However, you will need to provide the following information:
- A Gifted Deposit letter.
- The names of you and the applicants.
- A photo ID document.
- Proof of address.
- The amount you intend to gift.
- The current location of the funds.
- Your relationship with the mortgage applicant.
- A statement indicating it’s a gift.
- A statement that you won’t have a commercial stake in the property.
- Proof of affordability.
Furthermore, all these documents will need to be signed by a witness.
Using Equity Release to Help Your Children Purchase a First Home
One of the most common ways parents in the UK can get the money to help their children with a property purchase is through equity release. An equity release loan is designed for homeowners aged 55 or older who want to access the tax-free cash tied into their homes.
What’s great about equity release as an option is that you don’t have to pay back the money in your lifetime. Instead, the loan and compound interest are repaid from the sale of your home when you die or enter long-term care.
Furthermore, you don’t have to worry about moving house as you can unlock the cash and live in your primary residence, rent-free, for the rest of your life. Therefore, equity release is a fantastic way to give your children an early inheritance to buy a new home.
Chat to a financial adviser to find out more about equity release products.
Beyond equity release, there are some fantastic alternatives to raise money to gift your children in your retirement. While the dream is that your children can purchase their own home, it’s not always a reality, especially in 2022. An early inheritance could give them the start to life that many millennials dream of.