Expert View: Lucy Best, mortgage adviser at KDW Financial Planning, on the Bank of Mum and Dad
Lucy Best, mortgage adviser, KDW - Credit: Archant
What are the different ways in which you can help your children/grandchildren get a foot on the property ladder?
Equity release
Those aged over 55 will be eligible to use equity release to remove a lump sum from the value of their property. You will be required to consult an independent financial adviser before taking out an equity release product.
Remortgage
Another option is to remortgage the family home. This would release equity that can then be used as a deposit towards your child’s home.
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Downsize
As your children leave home you may feel that the time is right to downsize and use the funds to help towards a deposit.
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Gifting a deposit
Some parents may gift their children with a deposit meaning they do not expect to be paid the money back. Depending on the value of the estate this can be beneficial to inheritance tax planning.
Lending a deposit
Some parents choose to loan the funds rather than gift them. This will mean that the child needs to pay back their parents, which could either be in monthly instalments or in a lump sum some years down the line when the property is sold.
Become a guarantor
As a guarantor of your child’s mortgage you are taking part of the responsibility for the mortgage to give the lender confidence that the loan will be repaid in full and on time.
Joint mortgages
Entering into a joint mortgage works fairly similarly to becoming a guarantor in that you are partly liable for any missed payments; it differs because you actually own a percentage of a property.
We recommend discussing the options with a mortgage adviser as they can help you weigh up the benefits and risks for both you and your child.
Please do not hesitate to contact the team at KDW Financial Planning, based in St Albans, Hertfordshire.
T: 01727 85 22 99 | E: mail@kdw.co.uk | www.kdw.co.uk
