Supporting children, grandchildren or other family members onto the property ladder is becoming increasingly popular and in many cases necessary due to house price inflation, but there are other ways to fund a gifted deposit.
The later life alternative
The mortgage market has moved on since the rigid age caps of over a decade ago and you may find that a standard residential mortgage is better suited to gifting a deposit whilst still allowing them to stay in their family home and in control of the inheritance they want to leave behind.
Benefits of ‘later life’ standard mortgage borrowing
- Standard residential mortgage rates for older borrowers are typically lower than equity release rates as a whole and, although the gap is narrowing, this can make thousands of pounds difference to the borrower.
- Later life is only an agreement for the selected term of the mortgage – they tend to have shorter tie in periods so the borrower isn’t tied in ad infinitum, and can choose how long to borrow the money over.
- By remortgaging, you can change your later life mortgage deal to a new provider at the end of their deal period, so are not tied into any one provider or product for the life of the mortgage term.
- If later life mortgage borrowers come into an inheritance, they would be able to make overpayments or repay the loan, subject to the terms of the agreement with the lender. As equity release products are designed for the remainder of life, it can be more difficult and more expensive to make overpayments.
- With a standard mortgage for older borrowers, there are multiple repayment options – repayment, interest only or a combination of the two. All of these options mean that the interest doesn’t compound or roll up as it can do with equity release (which can potentially impact the remaining equity in the property).
The RIO alternative
Our RIO mortgage products enable later life borrowers aged 55 and over to borrow funds up to a maximum of 50% LTV, provided they have at least £150k equity in their property. A perfect way to release capital, the funds can be used as a direct deposit to relatives or even towards an additional property.
Key features of our RIO mortgages:
- Exclusive to borrowers 55+
- No maximum age limit
- Loans up to 50% LTV