Releasing Equity for Family Members
It can be difficult to look on and see your family members suffering financially. During the coronavirus pandemic, many parents and grandparents will be considering whether they can help support a business or pay off debts to take the pressure off the people most important to them. It is quite often the senior members of the family who are in the best position to help.
Depending on whether you have savings tied up in the stock market, it might not be the best time to cash in investments. An obvious option would be raising money from your home with a lifetime mortgage. This allows money to be borrowed without having to satisfy the lender that you are able to afford repayments and where the amount released can be used for any purpose.
A gift to a family member to help them through a financial problem is perfectly acceptable. After all, the people you will help are probably the ones who will inherit the house one day. Why not release some money now when they really need it rather than waiting for when you are no longer there.
Don’t think this is only available during times that resemble a national emergency. Those people who want to give their future beneficiaries a financial gift at any time may have the option of raising money from a lifetime mortgage.
It is common for this method to be used to help raise a deposit for a house purchase or to deal with student loans. It might be that you would like to make a gift to help manage a future inheritance tax liability and money borrowed from the house might be preferable.
There are some choices when it comes to servicing the loan. There is no immediate need to pay off any of the borrowing, but interest can be paid to prevent the loan increasing. These interest payments might even be funded by the person who receives the gift. It must be recognised that a lifetime mortgage is meant to be exactly that, so settling the whole loan is likely to trigger early repayment charges although up to 10% can usually be cleared without penalty.
There are a couple of other things that might be of concern; this is an Equity Release arrangement and you need to understand how it works and what the long-term implications are, it is important to consider whether you need to reserve some of the equity for personal use in future. You might also want to discuss how the money will be used by your children and grandchildren and if you are doing the right thing by intervening.
We can help. Our advisers will only recommend Equity Release where we are completely comfortable that you understand the implications and when it is absolutely right for you. If it isn’t, there is no obligation to move forward, but at least you will have explored the options.
To talk to an expert about whether Equity Release is right for you, give us a call on 01823 286271.