Today’s first-time buyers face increasing house prices and a crowded rental market. Many people are in their thirties before they can afford to buy a home.
Over half of first-time buyers stated that raising funds to deposit a deposit was the most difficult part of homeownership. Many first-time buyers rely on their parents for help in achieving their deposit amount. The total contribution to the ‘Bank of Mum and Dad” was expected to be PS9.8 trillion by 2021.
Later life lending opportunities
The desire to own a home is high among younger generations. This means that grandparents and parents need to be more supportive.
Equity release leads uk is an option for over 55s. Products like lifetime mortgages are growing in popularity after multiple product reforms to protect consumers. Perceptions are changing due to ‘no equity guarantee’, flexible features, and average interest rates of 3.95% in 2021.
Five situations where equity release products might be able to support first-time buyers
- Renting is money they won’t see again – A report by Equity Release Council suggests that home ownership could provide a financial benefit of PS326,000 over 30 years, compared to renting. This is due to lower monthly payments and the building up of their housing equity.
- Preferential mortgage rates: While 90-95% mortgages are available, there are less options with lower rates. A larger deposit allows the buyer to access a wider range of mortgage products.
- It’s important to get it right the first time.
- Project properties – First-time buyers often don’t have the funds to renovate costly properties. A lifetime gift may allow them to purchase a property that was not an option in their initial search.
- They can see their inheritance – An average person will inherit an inheritance at the age 61. Many people reach this age and are financially stable. They also have a comfortable life. An earlier inheritance may be more beneficial. A lifetime mortgage can reduce the inheritance and the gift recipient may be subject to inheritance tax.
These are just some examples of how equity releases products can help younger generations to get on the property ladder. Although later-life mortgages can have their advantages, there are also risks.
A lifetime mortgage is a loan secured against your client’s house. Interest is charged on the entire loan amount plus any interest that has already been added. The loan is typically repaid after the last borrower dies or moves into long-term care. To reduce the total cost of the loan, your client might be willing to pay part or all of the monthly interest. This could also impact any means-tested benefits that your client may be entitled to. If your client has other options for borrowing, you should consider them first.
