As property prices have risen at a faster pace than wages over the last few years, first-time buyers are finding it increasingly difficult to save the required deposit to get on the property ladder. If you own your home, you might be able to use your property wealth to give loved ones a helping hand towards homeownership.
Analysis by the Home Builders Federation from September 2024 suggests the average first-time buyer would have to save half of their earnings, after covering rent and bills, for almost a decade to afford a deposit. It could mean the goal of buying a home seems out of reach for many people.
Indeed, family support is essential for many first-time buyers.
January 2025 figures from Legal & General suggest almost half of under-35s who recently bought a home received financial help. Throughout 2024, families collectively gifted £9.2 billion to first-time buyers.
Here are five ways you might use your property wealth to support loved ones.
1. Release equity by downsizing
If you’re planning to downsize and purchase a cheaper property, you may opt to gift some of the equity you release. This could provide your loved ones with a lump sum they can put towards a house deposit.
Before you proceed, you might want to assess your long-term finances to understand the implications of gifting a lump sum.
2. Remortgage your home to borrow more
As a homeowner, you might be able to borrow more through your mortgage, with the additional borrowing secured against your home, to gift to your loved ones.
Borrowing more through your mortgage is likely to increase your monthly repayments and mean you pay more interest over the full term. So, it’s important to be aware of how this option could affect your personal finances and explore alternatives so you can weigh up the pros and cons.
3. Act as a mortgage guarantor
Having a guarantor could allow some first-time buyers to purchase a home with a lower deposit or borrow more to get on the property ladder sooner.
While the main borrowers would own the property, you’d be legally responsible for the debt if the borrower missed their mortgage repayments. Usually, your property or other assets will be used as security if you act as a guarantor.
While you are not immediately gifting assets in this scenario, it’s important to be mindful of the potential costs if your loved one defaults on the debt.
4. Help them with a family offset mortgage
A family offset mortgage allows you to use your savings instead of a deposit to offset the mortgage.
You’d usually need to place your savings in a savings account with the lender. You may receive interest on the savings and, assuming the borrower meets all their repayments, you’ll receive your deposit back after a defined period.
This could be a good option if you have a lump sum that’s earmarked for a long-term goal. However, you should weigh up the risk of your loved ones not meeting their mortgage repayments, you would lose some or all of your savings in this scenario.
5. Access property wealth through equity release
Finally, if you are aged 55 or over, you could use equity release to access your property wealth and gift it to loved ones.
Equity release is a type of loan that’s secured against your home. Unlike traditional loans, you don’t need to make repayments. Instead, the interest is rolled up, and the total debt is repaid when you pass away or move into long-term care.
As you’re not making repayments, the amount owed through equity release when the loan is repaid can be far higher than the initial amount you borrowed. As a result, it will affect the inheritance you leave. If you’re thinking about using equity release to help your family get on the property ladder, it could be useful to talk about how it will affect their inheritance.
In addition, equity release could affect your eligibility for means-tested benefits and make it more difficult to move home. So, it’s essential you understand how using equity release might affect both your short- and long-term finances, and explore alternative options to decide what’s right for you.
Contact us to talk about your mortgage needs
If you want help securing a mortgage or would like to discuss equity release, please contact us.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.
A lifetime mortgage is a loan secured against your home. To understand the features and risks, ask for a personalised illustration.
