Gift to Loved Ones with Equity Release: What You Need to Know
In today’s financial landscape, many older homeowners are exploring ways to support their loved ones financially without affecting their day-to-day lifestyle. One option that has grown in popularity is equity release, particularly to gift money to children, grandchildren, or other family members. But how does it work, and what should you consider before taking this step?
What Is Equity Release?
Equity release is a financial product that allows homeowners over the age of 55 to unlock some of the value tied up in their property while continuing to live in it. There are two main types:
- Lifetime mortgage: This is the most popular equity release option. It allows you to access a cash lump sum or smaller amounts when you need it, whilst you continue to own 100 per cent of your home.
- Home reversion plan: You sell all or a portion of your property at less than its market value to a home reversion provider, in return for a lump sum or smaller regular payments. You can stay in your home, typically rent-free, for as long as you live.
Find out more with your free equity release guide >>
Alternatively, click here to calculate how much you may be able to release >>
Gifting Money to Loved Ones
You could consider equity release to help family members with expenses such as:
- Helping children or grandchildren buy their first home.
- Funding university or further education.
- Supporting a family member’s health or care needs.
- Providing a financial cushion for younger generations.
Gifting through equity release can be a popular option because it allows you to pass on money while you are still alive, giving you the satisfaction of seeing your loved ones benefit directly.
Things to Consider
While the idea of gifting money via equity release could be appealing, there are several important considerations:
- Impact on the inheritance you leave for loved ones
Equity release reduces the value of your estate. If leaving an inheritance is important to you, think carefully about how much to release - if at all. - Effect on means-tested benefits
By receiving a large sum of money, some benefits may be affected now or in the future. - Interest
Lifetime mortgages accrue interest each year, meaning the amount owed grows. This could significantly reduce the estate value left behind. - Costs
Common costs may include legal fees and valuation fees to assess your property’s worth. You must receive independent advice before proceeding, meaning there will be fees involved with that too.
Getting Professional Advice
Because equity release is a significant financial decision, it’s essential to seek independent advice. A qualified advisor can help you weigh the benefits against the risks, ensuring your plans for gifting are suitable for your personal circumstances.
Advice is required to proceed with equity release and there may be other options to better suit your circumstances. A specialist advisor, such as those at Age Partnership+, can talk you through the different options to help you find out if it could be right for your individual needs.
Equity release may involve a lifetime mortgage, secured against your property, or a home reversion plan. It will reduce the value of your estate and impact funding long-term care.
Any money you release, plus accrued interest, is repaid when you die or move into long-term care.
Initial advice is provided for free and without obligation. Only if your case completes would an advice fee of £1,995 be payable. Other lender and solicitor fees may apply.
The Radio Times equity release service is provided by Age Partnership Limited. Radio Times is a trading name of Immediate Media Company London Limited which is an Introducer Appointed Representative of Age Partnership Limited, 2200 Century Way, Thorpe Park, Leeds LS15 8ZB. Company registered in England and Wales No. 5265969. VAT registration number 162 9355 92. Age Partnership Limited is authorised and regulated by the Financial Conduct Authority. FCA registered number 425432 and is trading as Age Partnership Plus.