Stalling wages and rising house prices have left many people unable to afford their first home. Intergenerational mortgages are a possible solution to this. An intergenerational mortgage is when a parent or grandparent helps their child or grandchild buy a property. It aims to help families to pass assets onto younger generations.
Many parents and grandparents leave their children an inheritance, however it is likely to come too late to help them with buying their first home, an Intergenerational Mortgage is a way to overcome this barrier.
What are the advantages to the parent/grandparent of an intergenerational mortgage?
Intergenerational mortgages can help you to plan your tax affairs and potentially mitigate any Inheritance Tax liability as the money gifted falls outside of your estate. Intergenerational mortgages will still allow you to continue your own financial planning and reach your own financial goals while helping your loved ones.
There are many different types of Intergenerational Mortgages, it is important you speak to an adviser to determine which is most suitable for you circumstances. For example, there are options that allow you to retain control over your assets or remaining invested in the stock market.
How do Intergenerational Mortgages work?
There are different ways a parent or grandparent can help their younger relative to get onto the housing ladder.
One option is a joint mortgage application where the parent or grandparent applies for the mortgage with the young relative. The Intergenerational Mortgage is offered by Metro Bank and if approved, you would be liable for the monthly repayments if your relative fails to pay them. Metro Bank does not require you, as a joint applicant, to be registered on the property deeds which means you avoid Stamp Duty and tax implications of you purchasing a ‘second property’. Please note that although you may not appear on the property deeds, jointly obtaining a mortgage will affect your credit score.
Another option is contributing towards the house deposit so that they can get a more affordable loan-to-value mortgage. This will reduce the interest rate and monthly payments.
Four Wealth Management are a Senior Partner practice of St. James’s Place Wealth Management. St. James’s Place Intergenerational Mortgage scheme will allow you to gift assets towards the deposit using the Money Management Account facility which means client’s existing eligible investments do not need to be encashed so there are no tax or withdrawal charges to pay. When your child/grandchild is able to, they can repay the Money Management Account.
Please note that you will have restricted access to your investments at that time and terms and conditions will apply.
Book a no-obligation meeting
You can book a no-obligation meeting with a Financial Adviser to discuss Intergenerational Mortgages. This can be a telephone meeting or face-to-face meeting at your home address or at one of our offices in Bristol, London or Cirencester. To book, please contact us on 0117 973 0500.
The home on which the mortgage is secured may be repossessed if the mortgage borrower(s) does not keep up repayments on the mortgage.
