Equity Release to Help Child Purchase First Property

19th August 2022

Michael Frimpong

Equity Release to Help Child Purchase First Property
Michael Frimpong

Michael Frimpong

Key Figures: 

  • Client: British National & Resident
  • Property type: Detached House with outbuildings
  • Property Value: £2,500,000
  • Loan Amount: £880,000
  • LTV: 35%
  • Interest Rate: 1.85% - 5 Year Fixed

With property prices increasing and the rise in the Bank of England interest rates, it is no secret that first-time buyers have been struggling to get on the property ladder. In fact, according to data compiled by UK Finance, the average term of a home loan for first-time buyers in the UK hit a record of 30 years in June, compared with 25.5 years in 2005. 

Helping get onto the property ladder is something many parents wish to do for their children. As well as being helpful, as a parent, you may feel it is an excellent way to support your children's investment in their future. Helping your child get a mortgage can be more rewarding than providing cash or covering living expenses. Many parents favour assisting children in securing a mortgage because it encourages them to take on financial responsibility while still giving parents a way to step in and provide financial support if needed.

In this case, we were approached by a couple, one of them being a 50% shareholder of two profitable companies, and the other one a land and property owner. The clients wanted to release equity from their unencumbered property to support their child's first property purchase with a gifted deposit. 

Releasing capital from the property, which you can then invest elsewhere for a higher rate of return, can make much sense. As a result, there has always been a demand for equity release schemes involving properties. Due to uncertainties and challenges in the market, equity release schemes have become even more popular. Having said that, maximising your asset is easier said than done - seeking help from an experienced mortgage brokerage can make all the difference.

In this case, we sourced a lender who was comfortable to use the gifted deposit alongside a share of the company's profits and property income. Providing a comfortable 35% LTV with a 1.85% 5-year fixed rate, this mortgage was on an interest-only basis with the sale and downsizing as the repayment vehicle. 

As this case illustrates, Enness can structure funding requirements specifically around your situation. Get in touch for a no-obligation chat about your situation and your plans, and the team will present you with the options available. 

Information contained in our case studies is for market and illustrative purposes only. In some cases, these may be made up of multiple cases and are for illustrative purposes only.

Some case studies are made up of enquiries that have come into the business, not all business completes, and the posting of a case study does not represent a completed piece of business.