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May 192017
 

The Bank of mum and dad is often relied upon by first-time buyers to give them a leg up onto the property ladder, but increasingly grandparents are helping out financially too.

Nearly one in 10 (8%) of first-time buyers now turn to their grandma and grandpa for financial support, recent research by Santander Mortgages found, up from 2% just five years ago. Separate research from insurer Legal & General found that around 22,000 grandparents last year provided financial support for first-time buyer grandchildren.

It’s hardly surprising that many first-time buyers need help from the bank of gran and grandad, given that soaring property prices in recent years have pushed up the amount needed as a deposit. Most mortgages lenders require buyers to put down at least 5% of the property value, but even this often isn’t enough to ensure that their property purchase goes through.

According to a survey by Nottingham Building Society, 35% of would-be first-time buyers saw their property deals collapse in the past year because they didn’t have a big enough deposit.

Property website Rightmove’s latest property index shows that the average price of a first-time property – one with up to two bedrooms – is at a record high of £194,881. That means a 5% would amount to £9,744, while a 10% deposit would be £19,488.

Grandparents who are keen to help their grandchildren buy their first home often find most of their wealth is tied up in their own property.

One option that might be worth considering is Equity Release, whereby you unlock wealth from your home, without the upheaval of having to move. Drawdown lifetime mortgage schemes are usually the most popular type of equity release plan, as they enable you to release equity as and when you need. Interest rolls up over time and is only repaid along with the amount released either when you and your partner move pass away or go into long-term care.

Latest figures from equity release specialists Responsible Equity Release found that 4% of those who took out equity release plans last year gave the money as early inheritance. The most popular reason for older people to unlock wealth from their homes was to clear their own mortgages (36%), while 28% wanted the funds as a cash cushion in retirement.
Nigel Waterson, chairman of the Equity Release Council, the trade body for the equity release sector, said:

“Older homeowners are increasingly realising that there are a number of potential uses for their housing wealth beyond supplementing their retirement income, including re-investing in their homes and helping younger family members by providing a living inheritance.”

However, equity release should never be undertaken lightly, or without seeking professional financial advice, as it can affect your entitlement to state benefits and will also reduce the value of your estate.

It’s also important to understand that equity release rates are higher than standard mortgage rates, although they have fallen in recent years. According to Moneyfacts.co.uk, the average fixed rate for equity release deals has fallen to a record low of 5.63%. There are also far more options to choose from, with the number of fixed equity release products having increased from 52 options in 2015 to 82 today, the highest recorded figure in eight years.

Steve Wilkie, managing director at Responsible Equity Release, said:

“The equity release industry has also been far more receptive to innovation, recognising the importance of meeting the changing demands of customers who are more aware of equity release but want more choice and flexibility.

“The greater variety of products, such as interest-only lifetime mortgages and flexible repayment, has attracted a whole new market to the benefits of equity release.”

Mortgages

 

HomeExpert Mortage Advice

You may be urgently looking for a mortgage; our competitively priced Mortgage Service based in Haywards Heath, supports clients nationally.  At Mike Oliver Associates we pride ourselves in helping all types of clients to become property owners:

•    First Time Buyers
•    Home Movers
•    Owners Looking to Re-Mortgage
•    Owners in the Buy to Let Market
•    Holiday Home Owners
•    Business Owners

We can offer a huge choice of mortgages (more than 5,000 schemes at a recent count) to suit your precise needs and we can help you quickly.  We will find you the right scheme, liaise with the lender, surveyor, estate agent and solicitor and we will update you at every stage.

As Financial Advisers, we are morally and legally obliged to protect the assets of our clients, when taking out a mortgage.

Our Haywards Heath team can source Buildings and Contents insurance at competitive rates. For Buildings and Contents insurance we offer products from a selected panel of providers.

If you are concerned about repaying an Interest Only Mortgage then contact Mike Oliver direct.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.

For mortgages we charge a fee, usually of £600.  We will also be paid a procuration fee from the mortgage provider if one is available.

Remember, Mike Oliver Associates are directly authorised and regulated by the Financial Conduct Authority.  Speak in confidence to us on 0845 4021757 or tell us your requirements on the Contact Us page and we will get straight back to you.