We have got used to the expression, “The Bank of Mum and Dad”, with reference to the financial support that parents can offer to their children who are struggling to get onto the housing ladder. However, today it’s grandparents who are increasingly helping family members to climb onto the first rung. A new term has come to the fore, “The Bank of Grandad and Grandma.”
In fact, a survey last year by Santander Mortgages discovered that 1 in 10 first-time buyers are now turning to their grandparents for financial support. This is a big increase from 5 years ago when the figure was just 2%.
Equity Release – Advantageous for the family and grandparents
For many grandparents it is something that they want to do whilst they are still alive, so that they can enjoy seeing younger relatives in a home of their own. Many grandparents are asset rich but cash poor and so it may be an option to consider an equity release mortgage. Here, capital is released from their home without them having to move. This can be a solution that may be advantageous to the family and to the grandparents themselves.
Drawdown Lifetime Mortgages
Quite often drawdown lifetime mortgages are the most popular as they will enable you to release equity when you need it. The interest that this type of mortgage accrues is only repaid when you pass away or you and your partner go into care. The mortgage will pave the way so that you can give your children or grandchildren an early inheritance. It also has the advantages of paying off your mortgage, if you wish and providing you with money during retirement.
What to consider before helping the family
However, as a grandparent, there are things that you must consider before you take on this arrangement.
- Are you gifting the money or is it a loan?
- Are you set financially for the future?
- Can you really afford to lend the money?
- What will happen if the family member splits from their partner?
- If you are loaning the money, will the recipients be able to pay you back later?
A Big Decision – Ensure you get the right advice
It is certainly a big step and your generosity and providing the Bank of Grandad and Grandma will almost certainly be really appreciated. However, you must consider your needs as you grow older. This means that it’s important not to gift or loan more than you can actually afford. The decision to take out an equity release mortgage should not be taken lightly. It will impact on the value of your estate and it may even affect your state benefits entitlements.
How can Paxton Equity Release help you?
Martin from Paxton Equity Release is an experienced equity release mortgage adviser and will be delighted to go through your options. He will sit down with you and discuss what is best for you and your family over a cup of coffee or tea. You will then have all the facts to take to your financial advisor should you feel that is necessary. Please call Martin on 01892 617070 for a chat or email firstname.lastname@example.org