The Question
Can the money raised through equity release be used to fund my son’s house purchase? If so, how will this impact me from a tax perspective?
To offer you some context I am 68 and own my home, valued at approximately £350,000, which I live in alone. My son is renting and wants to buy his own house so I would like to use equity release to fund a £100,000 deposit towards his first property.
Is this a valid use of equity release? Are there any rules around this? For example, will I be liable for additional stamp duty charges and, if so, is there a way around this?
Mark’s Answer
Thank you for your question and I can confirm that you can use the proceeds of equity release to make a gift to your son and he can use your kind gesture to help him purchase his own home.
Furthermore, I can confirm that you will not have to pay any stamp duty or any tax when you raise capital from the equity in your home. I would recommend that you talk to one of our expert advisers who will talk to you and understand your plans and then create a bespoke solution based on your circumstances.
You can make a gift to your son, and although you have not provided explicit information, I can confirm that based on your age and property value it would be possible to raise £100,000. Based on this loan-to-value requested rates currently would start from 5.90% MER.
For example, using a flexible Lifetime mortgage, you would continue to retain 100% ownership of your home and the loan would attract a fixed interest for the rest of your life. You and your son could decide if you want to service the loan by making full or partial monthly payments, or make no payments at all, the choice is yours.
However, before you make the very kind gesture to your son, it is important to understand the impact that the gift could make on your own circumstances in the short and long-term.
For example if you are eligible or in receipt of means tested benefits they would be impacted. Additionally, once you have made the gift you would not be able to use the money for your own purposes in the future including paying for long-term care.
Finally, although your gift will not attract income tax or stamp duty it could attract inheritance tax for your estate for up to seven years following the gift, depending on other assets you may have.
However, rest assured as our friendly whole of market expert advisers will help and guide you without obligation. They will discuss and assess your situation and you can chat to them over the telephone, face-to-face, or by video conferencing, and your son is more than welcome to join you at the meetings should you wish him to attend.
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
