Equity Release Gifting Options For Your Friends And Family

equity release gifting

Gifting equity through an equity release product can be a great way to provide financial assistance to family members over the age of 55.

Equity release gifting allows individuals to access tax-free cash from their homes while also helping younger generations pay off their mortgages up to 12 and a half years sooner.

It can be any amount you choose, but it generally has to be at least 50% of what’s left on your mortgage balance after deductions.

Equity release gifting is also beneficial for inheritance tax purposes, as gifts made three to seven years before death are not subject to inheritance tax.

Benefits Of Our Services:

  • Release equity from your home as a cash sum or via regular payments
  • Exclusive rates and offerings from the top equity release providers
  • Release money for repairs or home improvements like a new kitchen or bathroom.
  • Help a family member purchase their first home.
  • Pay off all your credit cards and loans and have zero monthly payments.
  • Switch to a better lifestyle, change your car or have a well-deserved holiday.
  • 100% independent, securing you quotes from the UK’s leading equity release companies.

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Find The Right Equity Release Deal – Rates From 4.91% For 55 And Over.

For those aged 55 and over, there’s a great chance to provide more stability and security both to their finances and those of their loved ones.

Equity release schemes enable people to benefit from the wealth stored in their homes, providing them with cash when they need it most.

Though the UK economy is experiencing disruption, there are still hundreds of equity release plans available on the market which offer competitive rates of interest, good loan-to-value levels, and long-term security.

If you’re worried about how equity release might affect your future beneficiaries, you can use inheritance protection to guarantee a certain portion of your property’s value will be passed on when you die. This percentage remains untouched no matter how much money has been released against the property over time.

Fill out the form above for a free quote – our easy online portal takes a couple of minutes to fill out securely.

 equity release provider awards

2024 is seeing substantial growth in the equity release market. And an average of 25% of homeowners over 55 choose equity release gifting as their primary reason for releasing the cash tied up in their properties.

Over 60% of homeowners cited home improvements as the core motivator for choosing equity release; however, many are choosing to tap into their property wealth to help out friends and family with finances.

Equity release gifting to the family is becoming a more popular choice for many Grandparents choosing to help their Grandkids pay for university fees with equity release or paying for major life events, including weddings, first-time home buyer deposits, clearing credit card debts and loans with some opting to spend on travel with their loved ones to enjoy some quality time together.

With family finances being stretched, equity release gifting has been a major driver for homeowners over the age of 55 to turn to their property wealth. To release some cash and pass on an advance in inheritance, which is increasingly becoming known as a living inheritance.

gifting money from equity release

By using equity release, Grandparents can see their wealth go to good use while they’re around to benefit from seeing their loved ones enjoy a better quality of life with less financial stress.

Statistics for 2024 show that the total amount of equity released grew to an all-time high, with an average of £10 million daily paid out to homeowners through equity release.

The average lump sum released tax-free was £76,500. The most popular type of plan was drawdown, which contributed to two-thirds of all equity release loans approved. 15% of those were enhanced drawdown lifetime mortgages, which provides a higher LTV to homeowners over 55 with existing health conditions.

Specialist Advice Is Key To Equity Release Gifting For Friends and Family

With the significant increase in equity release gifting, it’s imperative that homeowners eligible for this type of finance know-how to go about using equity release for maximum value and limited risk.

Due to the high increase in interest by eligible homeowners, more lenders are entering the equity release market, which is driving competitiveness, making it a more feasible financing option for those looking to use their property wealth to gift to relatives.

Or perhaps extend a financial lending hand to a close friend to help reduce their debts, or more commonly for seniors to finance business investments or go into a partnership as most standard loans are restrictive on how money borrowed is used.

The majority of standard lenders are unwilling to approve loans for commercial investments. With equity release, gifting is more popular among investors as the money released is yours to spend as you, please.

That being said, if you are considering equity release for any reason, be it to help your Grandkids reduce student debt, get on the property ladder, treat your family to a holiday, yourself to home improvements, or even to age-proof your home so you can live there for the rest of your life, you do need specialist financial advice to be sure that equity release is right for you.

And if it is, you need to find the most appropriate type of equity release product suited to your financial circumstances. The average customer suited to equity release is those who own 100% home equity, and the property’s market value is at least £70,000.

The Types of Equity Release that May be Suited to Gifting

Equity release isn’t a one-size-fits-all financial product. There are different types of plans with varying degrees of flexibility on offer by various equity release plan providers.

The most common is the lifetime mortgage, with the vast majority choosing to use these with drawdown, which lets them draw on an initial lump sum payment leaving the rest available on reserve to borrow as and when it’s needed later in life.

A home reversion plan is an alternative type of equity release that your financial advisor will discuss with you. But most won’t recommend it as a viable option unless you have really specific circumstances, such as no plans to leave an inheritance to anyone, as a home reversion plan involves selling a percentage or all of your home equity to a plan provider for 60% or less of your homes market value.

Home reversion plans only represent around 1% of the equity release market.

The majority of plans eligible homeowners use for equity release gifting for friends and family are lifetime mortgages with drawdown.

With these plans, most plan providers’ initial lump sum payment paid out tax-free is £10,000 minimum. The total amount you can be approved for is based on a percentage of your home’s value.

At the earliest eligible age of 55, you can expect up to 20% LTV lifetime mortgages. For a home worth £200,000, you could borrow up to £40,000. Using drawdown, this could be paid as £10,000, leaving the remaining £30,000 on reserve to use later in life.

LTV ratios increase incrementally by plan providers based on your age at the time of application. For those over 60, more can be released, and again, there’s a higher LTV for those over the age of 65 and up to 50% LTV of equity release for over 90s.

Lifetime Mortgages Taken as a Lump Sum Tax-Free Payment

It is possible to take all the available equity a plan provider may approve you for as one lump sum using interest roll-up, which would require no monthly payments on the loan amount you’re approved for. Instead, compound interest is applied to the total loan amount repaid upon the sale of your property once both people in the residence pass or move into a long-term care facility.

This approach has the highest cost as the interest is applied to the funds released from its release date. This is partly why more people are choosing drawdown.

Drawdown Lifetime Mortgage

With a drawdown lifetime mortgage, only the funds released attract interest. The additional funding left on reserve for borrowing later is an advanced approval you can use at your leisure without incurring interest charges. By using drawdown, a lump sum can be released initially with surplus equity from your property wealth left on reserve to use as you need it or to boost your annual retirement income.

This option is handy for those requiring a cash boost to use for equity release gifting to help relatives out financially while keeping some funds available for personal use. Or to afford further gifting such as when your Grandkids are getting married, a newborn arrives in the family or any other expensive life event.

Additionally, it’s beneficial to have some funds on reserve you can call on should you need emergency care funding, home adaptations, or perhaps an expensive home repair, as it’s generally more difficult to be approved for standard loans when you’re in retirement.

Flexible Lifetime Mortgages

Flexible lifetime mortgages are an attractive option for seniors who want to use equity release gifting while helping control the loan’s interest costs to protect some of their families inheritance.

With this option, you can pay some or all of the interest the lifetime mortgage accrues each month, with the option to revert it onto interest roll-up should you begin to experience difficulty keeping up with the monthly interest payment. An alternative is an interest-only lifetime mortgage, which requires a commitment to make monthly interest payments on the loan approved.

Top Considerations For Equity Release Gifting

Equity release is a lifetime commitment, and due to the potential risk, you need to discuss things with an FCA-authorised financial advisor to ensure you’re suited to this type of finance. If you’re primarily using a lifetime mortgage for gifting money to your loved ones, you’ll need to know you’re financially covered for unexpected life events.

Life has a habit of throwing a curveball at the most inconvenient times. Your property wealth may be needed to boost your retirement income later in life, or you may need to use some of your capital tied up in investments, savings or your property to finance your care needs in your senior years.

People, on average, are living far longer than before. Sometimes decades longer. Some seniors today are finding their pension plans haven’t performed as expected. Or they’re living to an unexpected age that wasn’t financially planned for, lowering their retirement income and leaving them reliant on products like equity release to boost their income in retirement.

For those releasing equity from property wealth at a younger age, closer to 55 years old, you’ll want to consider long-term care costs before releasing a lump sum so you know there’s some surplus cash available should the need arise.

One of the most important factors is a Santander lifetime mortgage for the rest of your life. Plan providers can apply for an Early Repayment Charge (ERC) if you want to repay the loan early. These can be as high as 25% of your loan value.

There are different scenarios when lenders will waive the ERCs, including when you need to downsize your home (known as downsizing protection) or if your partner passes or moves into long-term care. You need to move to a smaller property you can manage independently.

Reviewing the terms and conditions with your financial advisor before applying for equity release is important. It’s one reason the FCA requires applicants to receive impartial advice from a financial advisor before applying for equity release, as there can be substantial costs if you choose an inappropriate plan.

Equity release will often affect any means-tested benefits, including Pension Credits. Your financial advisor will be able to go through your income, expenses and investment portfolio where applicable and work out how much benefits you’d be entitled to and the impact equity release would have on your available capital savings that could affect those state benefits.

The total value of benefits packages isn’t limited to a top-up on your weekly income.

There are annual home energy grants such as the Warm Home Discount scheme, vouchers for prescription glasses; some prescription costs can be covered, help with dental care and funding available for pensioners requiring a gas boiler repair to keep their home heated.

Besides the boost in retirement income, the total additional benefits of Pension Credits can be worth thousands of pounds. Releasing too much equity from your home can increase your savings beyond the threshold for means-tested benefits.

While equity release isn’t right for everyone, it usually is when you don’t have much cash on reserve but instead have your wealth tied up in your property.

And you’d like to use that to gift your family as a living inheritance. This way, you can enjoy seeing your friends and loved ones reap the benefits while you’re around to see them benefit financially, rather than worrying that whatever inheritance you leave behind doesn’t go to the use you intended it to be used for.

With equity release gifting, you can advance an inheritance to family and friends and control where the money goes helping to ensure it isn’t squandered.

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