How equity release is used for gifting

By Carrie Ann on

Today’s retirees are creating new traditions, such as adopting a more active and independent lifestyle and providing a better quality of life for their family now, rather than leaving a traditional inheritance. These attitudes have changed significantly over the past 20 years, and witnessed first-hand by advisers recommending equity release schemes.

Over the past 18 months, 49% of over 55s assisted their families financially. The most popular reason for gifting money was clearing debt (16%), followed by contributions to a home deposit (13%) and tertiary education fees (13%). Since 2016, property prices in the UK have increased on average by 7.9%. This means younger generations are finding it harder to purchase their first home.

Many homeowners over the age of 55 have discovered equity release is a viable option. They are able to retain their independence, as well as gifting money to family members to give them a solid start. Equity release gifting is something many would like to do, yet there’s uncertainty surrounding whether or not it’s genuinely affordable.

Gifting by using equity release is not the only solution to the issues aforementioned, and therefore its essential you seek independent equity release advice. Gifting to children has many advantages, but only when done for the right reasons & with the full facts being made aware.

Intergenerational gifting is becoming increasingly popular, particular with the affluent & retirees with higher property values, who are able to pass down some of their wealth now, rather than later. Helping the younger generation onto the housing ladder may seem a step forward to assist them in something they would otherwise have struggled with.

Equity release usually operates as a Lifetime Mortgage: a lump sum or drawdown loan secured against the value of your home, only repayable when you pass away or go into long-term care. Your home is then sold to repay the loan. Interest is usually fixed for the duration of the loan and no monthly repayments are expected, although monthly or ad hoc payments can be arranged to reduce the overall loan amount at your discretion.

You can expect to borrow up to 55% of the value of your home, dependent on the age of the youngest homeowner. All Lifetime Mortgages should be SHIP approved which means they provide the security of a no-negative equity guarantee, which means your loan will never exceed the value of your property and you are able to remain in your home until you pass away or enter long-term care.

By following standard guidelines from reputable industry regulators such as the Equity Release Council, the majority of over 55s who are homeowners can afford equity release gifting as well as enjoying their home and retirement.

Categorised in: Equity Release
This post was written by Carrie Ann