Helping Your Grandchildren: How Equity Release Can help
Many grandparents want to help their grandchildren start life well. This help can be for university, buying a home, or special events like a wedding or a first car. But with the cost of living rising, it’s not always easy to provide financial support.
That’s where equity release can help. It lets you access some money tied up in your home. This way, you can give to your family while still living there.
What is Equity Release?
Equity release is a way for homeowners aged 55 and over to access some of their home’s value as tax-free cash. The most common type is a lifetime mortgage, where you borrow money against your home but don’t have to make monthly repayments (unless you wish to). Instead, you repay the loan and any interest when you pass away or move into care.
Using Equity Release to Gift to Grandchildren
Grandparents can use equity release to gift money to their grandchildren. This can help with:
- Buying a first home – A deposit for a house can be hard to save, but a gift from grandparents can make all the difference.
- Education costs – University tuition and living expenses can add. A financial gift could reduce the need for student loans.
- Paying for a wedding – Weddings can cost a lot. A contribution from grandparents can make the day even more special.
- Helping with a first car – A car can create job opportunities and give independence to a grandchild. Equity release can help pay for this important milestone.
- Paying off debts – Helping grandchildren clear debts can give them a better financial start in life.
Will Gifting Money Affect Inheritance Tax?
If you give money as a gift and live for at least seven years, it won’t count for Inheritance Tax (IHT). You can help your family reduce the amount of tax they pay after you’re gone by using equity release and gifting. (always consult a tax expert for advice)
Things to Consider
Before you decide to use equity release to gift, it’s important to think about:
- How much money you’ll need for the future – Make sure you keep enough for your own needs, including care costs.
- Interest on the loan – A lifetime mortgage compounds interest over time, which means the total amount owed will grow. Some plans let you make interest payments to reduce this.
- Effect on benefits – If you receive means-tested benefits, releasing equity could impact your eligibility.
Is Equity Release Right for You?
Equity release may not be right for everyone. However, it can help you support your grandchildren financially. You can also enjoy seeing how your gift makes a difference. Talking to a qualified equity release adviser can help you see if it’s the right choice for you and your family.
To learn how equity release can help you give gifts to your grandchildren, check out Retirement Solutions. Visit them today.
