Are you looking to release equity from your property, perhaps to fund home improvements, for debt consolidation or just to improve your own lifestyle? Maybe you are in the position to be able to help your loved ones, and need some assistance with how to go about this.
Recent research from Legal & General Home Finance found that 79% of grandparents are providing financial support for grandchildren, and 1 in 12 (8%) have used the equity in their homes to do so. The survey also found that younger grandparents aged 50-64 were twice as likely to use property wealth to gift to grandchildren, than 65–74-year-olds.
With house prices remaining high, many homeowners are looking to the value tied up in their property as a way to pass on a living inheritance to their children or grandchildren. This might be in the form of a large gift, such as a contribution to a deposit on a first home, smaller gifts for big ticket items such as a wedding or car, or as regular financial support to meet rising living costs.
There are a number of different ways we could help you, and not all of these are as widely publicised.
Remortgage, Further Advance or Second Charge
We could look to arrange a standard remortgage on your property to raise the funds you need, depending on your circumstances. If you have a current mortgage, we can also look at taking a further advance with your existing lender, or taking a second charge with another lender. These are particularly useful options if you have a low rate on your existing mortgage, or have early repayment charges.
We have access to lenders with exciting and quirky products, specifically designed to help relatives help their loved ones. These include:
Joint Borrower Sole Proprietor
This is an alternative to what were “guarantor” mortgages. This allows additional applicants to be named on the mortgage to assist with affordability, without being named on the property deeds and having to pay additional stamp duty. All incomes can be considered, but also all outgoings. It is particularly useful where family members want to help with the purchase of a home, without taking ownership of the property, and rates are very competitive. The most common scenario is parents or grandparents being named on the mortgage to help children, but it can be used vice versa E.g., where parents are going through a divorce and one wants to remain in the property, using adult children’s income to help affordability.
Multi-Generational Products
We have access to lenders who allow up to 4 applicants and will use all incomes. In some instances, no family connection is required between applicants. Multi-generational living or living with friends is becoming more common, so that resources can be pooled to afford a property, and all bills etc.
Deposit & Income Boosters
There are lenders with innovative products to boost affordability, who can accept deposits in different forms to give the donor extra peace of mind- fully gifted, as an equity loan or interest free deposit loan. There can be up to 6 borrowers on the mortgage, and these can be removed down the line. This can mean a longer term can be taken, again helping with affordability.
Over 50?
Lifetime Mortgage or Equity Release
This is available for those aged 55 or above, and allows homeowners to release tax free cash from their residential home. This can be taken as one lump sum, or you can select a product which gives you a “drawdown facility”, allowing you to take additional amounts when needed. You do not have to make monthly repayments, but usually have the option to if you prefer.
Retirement Interest Only (RIO) & Term Interest Only (TIO)
A Retirement interest-only mortgage is generally aimed at over 50’s. They are available on a client’s main residence and very similar to a standard interest-only mortgage, but have two key differences which can make them a more flexible option- 1) The loan is usually only paid off on death, or if you move into long term care or sell your home. 2) You only have to prove you can afford the monthly interest repayments.
A Term interest-only mortgage does have a fixed term, and allows you to pay just the interest charged each month for the term of the loan. You don’t have to repay the amount borrowed until the end of the term. Typically, an interest-only mortgage term tends to range between 5 and 25 years. There are some lenders that will consider longer terms for a TIO, some spanning to 30, 35 and even 40 years in the right circumstances.
The monthly payments pay the interest but do not reduce your loan balance (unless you have made overpayments). This means that at the end of the agreed mortgage term, you need to repay the loan in full. Often, this is by selling the property and downsizing to something smaller.
To see if we could find a solution for you or your family, get in touch, and one of our advisers will be happy to chat through the options with you.
If you would like to discuss your options and see if we can help you, please contact us a call on 01702 538800 or email enquiries@ingard.co.uk and we will be happy to have a chat to see how we can help.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
