Many homeowners consider equity release as a way to help their children onto the property ladder – but what are the financial implications? Mark Gregory takes a look at this in his latest Q&A
The Question
My son is 35 and struggling to get onto the property ladder. Can I release the money from my home and use it to buy a property for him? My home is valued at £750,000 (London) and he’s looking at flats for £250,000 – or in that region – in the Midlands.
I could buy a property for him outright. But am I allowed to use equity release to buy another property and are there any implications for me? I am aged 75.
Mark’s Answer
Thank you for your enquiry and like many customers I can see that you are looking to provide capital for your son at a time when he most needs it and not wait for an inheritance that he might receive later in his life.
Furthermore, customers tell me they get immense pleasure seeing their loved ones’ benefit and be secure during their lifetime which, they tell me, is important to them.
However, at this stage, I am not sure if you are looking to gift your son the capital to allow him to secure the purchase of his new home, or if you are looking to purchase the home in your name and then you retain ownership, and he is your tenant.
The two options you have are very different from a taxation point of view because although I am not an inheritance or tax specialist, gifting capital to your son could have implications with inheritance tax for a number of years and purchasing a second home can include taxes including stamp duty, capital gains tax (if you decide to sell the home), council tax, income tax (if the property is rented out either short- or long-term) and inheritance tax.
Therefore, to understand your plans and to give you the best solution for your circumstances, you can talk to one of our friendly expert advisers who have lots of experience dealing with customers who want to help and provide capital for their loved ones.
They will be able to provide you with independent whole of market equity release advice, regarding all funding options and they will also discuss and consider your own personal circumstances.
This is because while making the gift to your son is to be admired, it is important that it does not have consequences on your current and future capital requirements because if the capital is a gift to your son, you could not use it for your own needs in the future for example to pay for long-term care costs.
Meet our expert…
Mark Gregory, founder and CEO of Equity Release Supermarket, is here to answer your questions. Mark is an adviser himself with over 20 years equity release experience.
He launched Equity Release Supermarket 10 years ago and it has grown to become one of the UK’s leading equity release specialists.
Email kate.saines@emap.com to ask Mark a question
