How Does Using Equity Release to Help a Child Buy a Property Work?

For many homeowners, the arrangement would involve a lifetime mortgage secured against their own home. You continue to own your home, and the lender advances money against part of its value.

Simple Illustration

Your home is worth £500,000.

You have an existing mortgage of £20,000.

You release £100,000.

This is purely illustrative and does not represent a particular product or recommendation.

Gift, Loan or Joint Ownership?

This is one of the most important parts of the decision because these arrangements are not the same.

Can Equity Release Be Used for a Child’s House Deposit?

Yes, potentially. This is likely to be one of the most common ways families use released equity to help younger relatives.

What Is a Gifted Deposit?

A gifted deposit is money given to a homebuyer that does not normally need to be repaid.

Your child's lender or solicitor may want confirmation that the money is genuinely a gift, you do not expect repayment, you will not gain an ownership interest and the source of funds can be explained.

Can I Loan the Equity Release Money to My Child Instead?

Potentially, but this needs more care than an outright gift. If you expect repayment, their mortgage lender may treat the money as a family loan rather than a gifted deposit.

Can Equity Release Be Used to Buy the Whole Property?

Potentially, if you can release enough money and the arrangement is suitable.

But the fact that you can release a large amount does not automatically mean you should. A larger release can mean less equity left in your own home, more interest accumulating and less future flexibility.

What If I Buy the Property in My Own Name for My Child?

That is very different from releasing money and gifting cash. If you already own your home and buy another residential property, additional-property tax can apply depending on where in the UK the property is located.

Read GOV.UK guidance on additional residential property purchases.

“Equity release can help you give your children a financial head start today — but your own financial security should always come first.”— My Later Life

Can Equity Release Help a First-Time Buyer?

Yes, potentially. A gifted deposit may help a child or grandchild get onto the property ladder sooner, reduce the mortgage they need and potentially improve their loan-to-value position.

Can I Help a Grandchild or a Child After Divorce?

Potentially, yes. Released funds could be used to help a grandchild buy their first home or assist a child who needs to buy another property, increase a deposit or buy out a former partner following separation.

Is Money Released Through Equity Release Tax-Free?

The money received from a lifetime mortgage is generally borrowed money rather than income, so receiving the loan itself would not normally create an Income Tax charge.

However, gifting money can have Inheritance Tax implications depending on the size of the gift, timing and your estate.

Read GOV.UK guidance on gifts and Inheritance Tax.

What Is the Seven-Year Rule?

For many outright lifetime gifts, the seven-year rule is important. If you survive for seven years after making a qualifying gift, it will generally fall outside your estate for Inheritance Tax under that rule.

Should I Keep a Record of the Gift?

Yes. Keep clear records of what you gave, who received it, the amount, the date and relevant bank, solicitor and gift-letter paperwork.

Could Using Equity Release Reduce My Child's Future Inheritance?

Yes. If interest is added to the lifetime mortgage, the amount eventually repaid can be more than the original sum released. The benefit is that you may get to see your family use the money while you are alive.

Could Equity Release Affect My Means-Tested Benefits?

Potentially. The effect depends on your circumstances and how released funds are held or used. This should be considered before taking a large lump sum.

What If I Need That Money Later?

This may be the most important question in the whole article. Before making a large gift, consider future income, care, home adaptations, moving plans, rising living costs and whether your own retirement finances remain secure.

Read the FCA's findings on equity release sales and advice.

Should I Release the Maximum Amount Available?

Not automatically. If your child only needs £50,000, borrowing significantly more than that could create unnecessary long-term interest. A drawdown lifetime mortgage may sometimes be worth considering where appropriate.

Illustrative Example: Helping With a First Home Deposit

HOW MY LATER LIFE CAN HELP

Helping Your Child Without Losing Sight of Your Own Future

At My Later Life, we can look at how much you want to give, your property value, age, existing mortgage, retirement income, savings, future expenditure, care considerations and family plans.

We can then search across suitable equity release lenders and plans available through our service. Where a lifetime mortgage is appropriate, we can compare interest rates, fees, drawdown facilities, voluntary repayment options, early repayment charges, inheritance protection and moving-home provisions.

The aim is not simply to release the largest amount available. It is to help you support your family in a way that remains suitable for you.

Frequently Asked Questions

Thinking About Helping Your Child Buy a Home?

My Later Life can help you understand how much you may be able to release, what the long-term impact could be and which suitable later-life options may fit your circumstances.

Can Equity Release Be Used to Buy a Property for a Child? The Final Answer

Yes, equity release can potentially be used to help a child or grandchild buy a property.

You could use the money for a gifted deposit, part of the purchase price or potentially the whole purchase price. But the structure matters, and helping your child should not leave you financially vulnerable later.

At My Later Life, we can help you understand how much you may potentially be able to release and search suitable lifetime mortgage and later-life lending options available through our service.

Further reading: The Telegraph has also covered how parents can use equity release to provide a gifted deposit and help children onto the property ladder, including some of the mortgage and inheritance considerations involved. https://www.telegraph.co.uk/financial-services/retirement-solutions/equity-release-service/gifted-deposit-mortgage-parents/

Important information: Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits.

A lifetime mortgage is a loan secured against your home. Interest may be added to the amount borrowed and can compound over time.

Tax treatment depends on individual circumstances and tax rules can change. Consider specialist tax and legal advice before making substantial gifts or purchasing property jointly with family members.

N.B. “This is a lifetime mortgage. To understand the features and risks, please ask for a personalised illustration. Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice.”

Author , Graham Clelland , My Later Life.