Rising house prices has resulted in some older homeowners unlocking the equity they have built up within their own property to gift house deposits to their children via equity release, but for those with children who already own their own home, is it is good idea to take equity release to pay off their mortgage?
A key benefit to parents gifting their children their inheritance early to pay off their mortgage early is that it will likely free up a substantial chunk of their monthly outgoings and the money can be used towards creating a more financially secure future instead, for example by increasing their pension savings or investing.
In fact, recent research by equity release advisors Key found that 1.7 million inheritors used the money to pay off their mortgage. Although Key revealed that the average age people inherit is 47, it also found that 29% of those receiving an inheritance do not do some until they are aged 65 to 74; by which most homeowners have repaid their mortgage.
As such, many parents might be tempted to gift their children their inheritance early so that it cannot only help towards their children’s future, but will also enable them to see their children benefit from the money. As Will Hale, CEO at Key, explained: “The idea of inheritance arguably works best when the person receives the support at a time in their life when it can do the most good for their long-term financial security. However, with the average age of inheritance sitting at 47 years old – when people are more likely to have built up assets – we are seeing more conversations happening about providing people with a ‘pre-inheritance’.