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Helping children or grandchildren to get on to the property ladder

helping_children_on_to_property_ladderPeter and Sue are in their mid 60’s: “We have recently retired and finally paid off our mortgage, and have built up enough pension and savings for our own needs. We are keen to help our two children: Our daughter is desperate to move to a larger property and our son has just completed a post-graduate degree and has a large student loan as well as other debts. We want to be able to help them now but we don’t want to sell our home or compromise the retirement we have saved hard to enjoy.

We wondered if we could use the value of our home to do this and have read about equity release mortgages. It would also be nice to have a fund we could draw on in the future to help our grandchildren and grandchildren without using all our savings. We understand that we probably won’t qualify for a standard mortgage due to our age, but also don’t want to commit to monthly repayments of interest. We are keen to understand how an equity release Lifetime Mortgage could help us?”

The “Bank of Mum and Dad” is recognised as one of the country’s biggest unofficial lenders, and according to the Aviva Retirement Report, 54% of homeowners say they would rather give family members a living inheritance and 1 in 3 plans to financially support their children.

The adviser from Apex CB met Peter and Sue and urged them to consider all the alternatives first, including gifting existing savings and investments to their children, and even downsizing to a smaller property. Peter and Sue chose to give their daughter £50,000 from their savings, but were reluctant to give away any investments that provide some of the income they enjoy. They were reluctant to sell the house at this stage of their life because of the emotional attachment the whole family has to the house they grew up in. It was decided that a Lifetime Mortgage would allow them to release a tax-free lump sum from their property for their son, achieving their goal of giving their children some of their inheritance when they need it most. By releasing a lump sum to gift to the children Peter and Sue can gift the children a living inheritance without using up the savings they have set aside for their own needs.

Using our “whole of market” research, a lender was found that offered a competitive fixed rate Lifetime Mortgage that released 25%* of the market value of Peter and Sue’s house. The fixed interest rate allows them to see how the amount borrowed would increase over time as interest is rolled up and added to the loan. They understand that there is no guarantee that their property value will rise, but expect to still be able to leave their children a further inheritance when they die.

Peter and Sue are delighted, knowing that they won’t be burdened with monthly repayments. Their children are very grateful for the help and supportive because they have the peace of mind of knowing that their parents can still enjoy retirement without selling the family home they all love.

* maximum borrowing is dependent on lender’s criteria.

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