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First-time buyers could cut mortgage terms by over eight years through equity release gifting

Updated: Jul 19, 2023

equity release

The average mortgage term for a first-time buyer in England could be reduced by up to eight years through equity release gifting, research from a lifetime mortgage lender has shown.

According to figures from More2Life, first-time buyers in Scotland and Wales could clear their debt 11 and 10 years earlier respectively if gifting was leveraged. This is based on a 25-year term.

The average amount of equity gifted to fund a deposit is estimate to be around £60,589, and could be used to secure a lower loan to value (LTV) mortgage at a cheaper rate.

More2Life noted that if a first-time buyer was able to pay the same monthly repayments as someone who did not have this level of deposit it could “substantially reduce” the time taken to pay off their mortgage.

Ben Waugh, managing director of More2Life, said: “With the recent Bank of England rate increase and the cost of living continuing to bite, there is no denying that many people are finding it harder than ever to take that first step onto the property ladder.

“Affordability criteria are stricter and even with the advent of 100 per cent LTV deals, younger borrowers are seeing their dreams of owning their own home getting further and further away.”

He added: “That said, this research shows unequivocally that members of the older generation are uniquely placed to provide real aid by donating a gift unlocked from their own home equity.

“We have already seen that an equity release enhanced gift of an average size could trim as much as 20 per cent from the time taken to pay off a mortgage in London, one of the most competitive property markets in the world.”

Waugh continued: “What our new research demonstrates is the wide relevance of equity release as a tool of financial empowerment, when combined with expert financial advice. The Bank of Granny and Granddad has an expansive scope, stretching from Edinburgh to London to Cardiff".

If you would like to receive expert advice about how releasing equity from your home could give your younger relatives a much needed boost on the property ladder, please contact us today to see how we can help.

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