Equity release or sell it to the kids?

With UK house prices reported to increase over the next five years by around a fifth making the average house price, currently at £214,500 increase to around £260,000 in 2016. This is good news for home owners, but for potential buyers who are already struggling to get their foot on the mortgage ladder means that the idea of owning their own home will become increasingly expensive. And with rents predicted to also increase by a fifth will make even harder to potential first time buyers to raise funds for a deposit.

This could also have a significant impact on retired home owners who are looking at equity release to release funds for the equity tied up in their home to help them finance their retirement. If the value of their homes does rise sharply over the next five years, then waiting may be a sound financial option. However if you're looking at equity release for urgent home repairs, or a holiday, then another 5 years is a long time. One option is to use an equity release calculator with the current value of your home, and then with the potential value on 5 years time to check if it's worth the wait.

Another option, for those who have children who are likely to inherit the property in the future, yet are not on the housing ladder themselves could be to look at ways of them buying your house, or buying into it prior to you leaving, to put it mildly. For example, a typical house is worth say £200,000 and there is a mortgage of £15,000 still to pay. A child could buy their parents house for the £15,000 needed to pay off the mortgage (in effect, releasing equity), then the house could be gifted to the child. However it's imperative that this is thoroughly discussed with as financial and mortgage advisor as capitol gains tax and possibly inheritance tax could land the buyer with hefty tax bills which may put ownership at risk anyway.

If the home is owned outright then it would be eligible for equity release, as homes with a mortgage still to pay, no matter how small are not eligible. Again, using an equity release calculator will give you an idea of the funding your home could give you, however instead of getting your hands on the money from a dedicated equity firm, again you could look at your children. They could buy into your home, giving you much needed funding which could also help avoid inheritance tax if the value of the property in question is just above the current threshold. Again, discuss this with a financial and mortgage advisor as they'll be aware of any hidden taxes or loop holes which may be worth avoiding or exploiting.