Using equity release to financially support family

If you’re considering equity release, you might be asking whether you could use it to help a family member over some financial hurdle – whether that's university fees, wedding costs, or the first step on the property ladder. But what are the rules for gifting money in this way, and is it safe?

Equity release is a financial option that lets homeowners, aged 55 or older, get their hands on some of the equity tied up in their property. 

The most popular type of equity release – and the only type Aviva offers – is called a lifetime mortgage. This lets you borrow cash against the value of your home, and receive it as a lump sum. 

A lifetime mortgage is a long-term loan secured on your home. With a lifetime mortgage you don't need to make repayments during the lifetime of the loan. Instead, interest continues to build up. It's charged on both the original loan amount and all the interest previously added, which quickly increases the amount you owe. The loan and all the interest are usually repaid by selling your property when you pass away or move into long-term care, subject to the lender's terms and conditions. Inheritance will be reduced and welfare benefits may be affected.

Lifetime mortgages are regulated by the Financial Conduct Authority (FCA) to make sure customers are protected. However, a lifetime mortgage won’t be suitable for everyone. 

Because of this, you’ll need to get regulated financial advice before you can take out a lifetime mortgage. If you already have a financial adviser, it’s best to speak to them first. Otherwise, you can talk to one of our advisers about our lifetime mortgage. Or you can find an independent adviser in your area with Unbiased. Please note the adviser may charge for their services.

Learn more about how equity release works here.

One risk of gifting money from equity release is giving away funds you might later need for holidays, healthcare or some other future cost. And if you’re receiving means-tested benefits, taking out equity release could affect your ability to claim. 

It’s also important to consider how a gift could affect family members who get it. While it might mean they receive money now as a 'living inheritance', it will reduce the amount of inheritance you're able to leave them in the future. They're also likely to receive less overall. In fact, paying off a lifetime mortgage with its built-up interest could use up the entire value of your home, meaning there's nothing left to pass on.

To help protect your beneficiaries (people you’d like to receive some part of your estate),  most equity release providers offer a “no negative equity guarantee". This makes sure neither you nor your estate will have to pay back more than your home can reasonably be sold for, even if the sale doesn’t fully cover the amount you owe.

The main benefit of gifting equity release is the flexibility it offers. You may not want to wait until you pass away to help your children buy a car, put down a deposit on a property, or pay off a debt. With equity release, you can help them earlier, when the need arises.  

With an aviva lifetime mortgage, you’ll always receive a cash lump sum. You can also choose to set-up a cash reserve facility, which you can take funds from later. No interest will build-up on the money in your reserve until you to take it, and we’ll set a new interest rate each time you take money.

All providers let you choose to make partial repayments throughout the duration of the loan which will help to reduce the amount owed when you pass away or go into long-term care. 

In some cases, you can also set aside a percentage of your home’s value to leave for loved ones as part of their inheritance, but it will mean you won’t be able to borrow as much.

The amount you can borrow depends on your personal circumstances. Typically, most providers will use your age and property value to work out how much you can borrow.

Use our Equity Release calculator to find out how much you could unlock with an Aviva lifetime mortgage.

The money you receive from equity release is tax free in your hands. You don't have to pay income tax or capital gains tax on it.

If you give money you receive from equity release to someone else and live for at least seven years afterwards, the gift will be free of inheritance tax. If you die within seven years of making the gift, the recipient may have to pay inheritance tax on it. Whether any tax is due will depend on the value of your estate and who you gave the money to (you're allowed to give more to 'direct descendants', such as children and grandchildren, than you are to friends and more distant family). The rate of tax that applies will depend on how many years you survived after making the gift.  This is a complex area that you should discuss with your financial adviser before taking out equity release.

Tax information provided is subject to change, interpretation and may depend on an individuals circumstances.

Explore our equity release options