Helping Your Children With a House Deposit Using Your Home’s Value

The most common products used to help children with a deposit are lifetime mortgages (in lump sum or drawdown format) and capital-raising remortgages. A lump sum lifetime mortgage releases the full amount at the start, which works well if a child has a specific purchase timed. A drawdown lifetime mortgage releases an initial amount and holds a reserve for later access, which can work well if there are multiple children or if the amount needed is uncertain. A capital-raising remortgage on an existing residential mortgage may be appropriate where your income supports the repayments and your age is within the lender’s limits.

Before deciding, several considerations are worth working through. Your own retirement security is paramount. Before gifting significant sums you should be confident that your remaining income and assets will support your retirement through its likely length, including potential care costs in later years. Fairness between beneficiaries matters. If you help one child significantly, the others need to know, and you may want to adjust your will accordingly. Family dynamics around money can be difficult, and we recommend open conversations rather than secret gifts.

Tax implications of gifts are significant. A gift to a child during your lifetime may be caught by inheritance tax if you die within seven years of making the gift. This is known as the seven-year rule, and gifts made less than seven years before death are added back to your estate for inheritance tax purposes, with tapering relief applying to gifts made between three and seven years before death. The rules are more complex than this summary suggests, and specialist tax advice is worth taking before significant gifts. We are not tax advisers and we signpost to a qualified adviser for this element.

Long-term care funding rules also deserve attention. Local authorities can look at gifts made in the period leading up to a care assessment and treat them as deprivation of assets if they judge the gift was made to reduce contributions to care fees. This is a specialist area and we signpost to independent care funding advice where relevant.

The Process

Your first conversation is a relaxed discussion of what you want to do and why. There is no cost or obligation, and we are happy to have family members present if you would find that helpful.

We complete a full fact-find and, where significant gifting is involved, recommend you take independent tax advice alongside our mortgage advice. For cases involving long-term care concerns we also signpost specialist advice. We then come back to you with a written recommendation.

Every family situation is different. Helping one first-time buyer grandchild with a deposit is a different conversation from helping several adult children over a number of years, and our advice always reflects the specific situation.