How Equity Release Can Help First Time Buyers

Published: 08/10/2018

More older parents than ever are helping their children onto the increasingly out-of-reach housing ladder via the ‘Bank of Mum and Dad’, it was reported earlier this year (Click for more - How To Help Your Children Buy A Home)

Parents are more often than not doing so by utilising equity release - a lifetime mortgage for older homeowners where you release funds from your home, while remaining in it. There are certain terms and conditions as to who can take our an equity release mortgage. For more information about equity release, see: heree

Indeed, it’s estimated that older homeowners in the UK own as much as £1 trillion in housing wealth. That’s not to mention the other savings you acquire through your working years as well as wealth regenerated through years of contributing to pension schemes. It’s no surprise then that parents feel the desire and need to help their kids with life’s tougher purchases, whether that’s in buying a house directly, or paying off uni debt, freeing them up to actually start saving for a home deposit!

However, some more recent findings, have experts worried about this trend.

According to research by equity release advisor Key, around half of parents over 55 need legal advice about gifting money to their children. They are not often seeking this advice though, due to the costs they fear are involved in speaking to a lawyer.

The data showed that more than three quarters of over-55 parents find gifting rules complicated and are concerned about making mistakes.

This is fairly worrying, considering how popular equity release life mortgages are at the moment. This year, the equity release market reached the £870 million mark. To put this figure into perspective, that is 120% more than the £394 million registered in the first three months of 2016. Clearly, it is an absolutely booming product! Read more about the ER boom and the reasons why millions of Britons over 55 are taking out a lifetime mortgage in this article: What Are The Benefits Of Equity Release

A key reason listed by those who take out these lifetime mortgages is to help loved ones purchase their first home.

The Stats - Worried Mums and Dads

Two-fifths of parents aged over 55 want more guidance about this topic, according to Key’s research. In addition, parents would welcome tax incentives for gifting to children – providing that money is used for major life events, such as a first home purchase, university fees or to clear debt.

Many of those surveyed said that they would seek more expert advice from the likes of ER advisors and solicitors, but are concerned about the costs involved with these services.

The Stats - Worried Sons and Daughters

Likewise, the grown-up children (aged 18-40) of parents considering gifting them funds are also worried that the right decision won’t be taken. They worry that they don’t have sufficient financial knowledge to help their parents’ make a sensible choice and don’t necessarily know where to go to find it.

Indeed, over three-quarters of those in rented accommodation want more done to assist the Bank Of Mum And Dad with specific online information and guidance.

Worried About Gifting Money? This Is What To Do

There is absolutely no doubt that you must seek expert advice before making any major financial decision. It may cost you a little in fees, but ultimately, it’s going to be a whole lot less than if you make a bad decision about your finances. If you, for example, take out equity release, and wish to terminate the agreement later, there could be exit penalties for doing so and these can be expensive – up to 25% of the original sum you take.

When looking for an advisor - whether that’s a solicitor or a specialist equity release advisor (please note, advice must be obtained from the latter), if you are looking to take out ER) - there are a number of things you can do to ensure that they are the right choice for you.

Look for professionals who offer transparent pricing. In simple terms, a firm that tells you what the price will/could be for the service you require, without adding any surprises later down the line! You can check online reviews (Solicitor.Info, for example, is the official Google partner for solicitor reviews) to confirm your choice of advisor is reputable and of good professional standing (and so less likely to hit you with unexpected fees!).

To gain advice on finances in your retirement, including equity release, it is a good idea to sign up to The Money Advice Service and check their directory of retirement advisors. Other helpful resources are The Society of Later Life Advisers and the Equity Release Council.

If you’re already seriously considering equity release, your first port of call is to speak to a specialist, independent equity release advisor. All advisers recommending equity release schemes must have a specialist qualification. They should be a member of the Equity Release Council and be registered with the Financial Conduct Authority register.

GWlegal also has a number of online resources available to help you make an educated choice. Read our article on whether equity release is right for you: Make Sure Equity Release Is Right For You

How Else Can GWlegal help?

Just as first-time buyers need expert help before buying their first home, we believe that older individuals must seek expert advice before allowing loved ones to dip into the Bank of Mum & Dad.

At GWlegal we offer:

  • Almost 35 years of property experience
  • Qualified and expert equity release experts who deal with thousands of cases each year. We do useful checks for you, such as benefit check, to assess if and how your benefit entitlement will change if you take out a lifetime mortgage
  • The director of our equity release department, Richard Espley, is a true expert in this field. He has been in it since the very beginning, when this product was first created!
  • A unique home visit service; we will literally come to your home, free of charge, to assess your needs and the suitability of your consider ER plan to you and your circumstances
  • We have created a helpful and straightforward guide, sans the confusing legal mumbo jumbo, to inform you about equity release.

Other ways GWlegal can help first-time property buyers

Check out our special package for FTBs, First Moments. Young buyers will get expert advice, free materials to make the process smoother and even freebies!

The bottom line is - there is the help available, if you take a little bit of time to find it. If you have any further questions after reading this article, please feel free to get in touch with Richard and the team. We are always happy to have a friendly chat with potential and current clients, no strings (and indeed, no fees) attached!

Who are GWlegal?

GWlegal are a specialist equity release solicitors based in Liverpool.

If you have a legal matter you wish to discuss don’t hesitate to get in touch. You can call us on 0345 373 3737 or with your question.

Who are GWlegal? We’re a national firm with local values.

Interested in Equity Release?

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Content correct at time of publication.
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