Could your property wealth help provide the funds your younger family members need to enjoy the education they deserve?
The expenses of higher education can prove to be a stumbling block to the UK’s Millennial generation. UK universities are now able to charge up to £9,250 per year for tuition fees. As this does not include other expenses that students will incur, such as living costs, it is easy to see how some could struggle with the costs of education, even with access to loans. Learning to budget for the first time with such expenses to consider could represent quite a steep learning curve. In fact, recent data suggests that as many as two-thirds of UK students will never repay their student debt, indicating the longevity of the financial implications.1
With as many as 43% of this same generation hoping to use their inheritance to eventually pay off their debts, it would appear that many are prepared to wait to ease the financial burdens they accrue by choosing to develop themselves through education.
The value of your home – and how it could help
However, there is a way that you could help now. Recently published figures have revealed that the UK’s older homeowners now own as much as 75% of the UK’s housing stock. This equates to a staggering £2.8 trillion in home equity.2
If you are an over-55 UK homeowner, then there is a way for you to enjoy regulated access to this potentially considerable source of capital. What’s more, you can do so without the need to downsize and without the risk of losing your home.
With a lifetime mortgage, the UK’s most popular equity release product, you could release a significant portion of the value of your home as tax-free cash. The money you release is yours to spend entirely as you wish, meaning that it can be gifted to those in your family who need it most. The value of your home could be used to help cover the expensive costs of tuition fees and provide a boost to the finances of your youngest family members.
A lifetime mortgage simply replaces your existing mortgage. Rather than making regular payments however, the interest on your lifetime mortgage accrues over time before it is repaid at the conclusion of your plan. The balance – including interest – is usually repaid through the sale of your home only when you and your partner have both passed away, or you have both entered long term care.
Your peace of mind
All lifetime mortgages provided by a lender approved by the Equity Release Council feature a number of safeguards designed to provide you with financial peace of mind:
- You retain full ownership of your home for life
- A no negative equity guarantee ensures that you will never owe more than the value of your home. This means that you can never pass on lifetime mortgage debt to your heirs.
- Most lifetime mortgages are portable. This means that subject to the new house meeting the lender’s requirements, you are free to move home in the future should you wish.
What’s more, lifetime mortgages feature no required monthly payments. This could help free up more of your later life budget to be spent on the things you want. With fixed interest rates for the duration available, you can be provided with accurate projections meaning that you can see exactly how much your plan will cost.
With an ever-expanding range of products, there are increasingly innovative ways in which you can enjoy regulated access to your home equity. There are even plans available that allow you to preserve a portion of your equity for use in the future, and others that guarantee you are able to leave an inheritance.
Using your lifetime mortgage to provide an early inheritance.
The rules surrounding Inheritance Tax (IHT) in the UK can appear quite complex. We are obliged to state that the FCA do not regulate IHT planning, and we recommend you consult a specialist financial adviser if this is something that interests you.
However, the tax-free cash you release from your property can be used as part of a comprehensive IHT strategy. Provided that the money you gift to your heirs is given at least 7 years prior to your passing away, then the figure will not be included in your estate. With many households finding that rising property values are making them susceptible to the 40% rate on any estate valued over £325,000, this could prove a way of ensuring that you are able to provide an important financial legacy.
What’s more, if you gift the money for use with tuition fees, you could be providing the financial support when your family really need it.
Education can be a precious investment in your family’s future. With equity release you could have ready access to the capital you need to help provide your younger family members with the best possible start in life and enjoy the satisfaction of watching your legacy in action.
Could equity release help you? Call us now and speak to one of our expert team who will give you all the information you need.
0800 652 2955
2 Telegraph, ‘Over-50s hold three quarters of UK housing wealth’, 03/04/18