05 Jun Are young people relying on inherited money to get onto the property ladder?
Some millennials have unrealistic expectations of inheritance and how it may unlock the door to buying their first home. A survey by wealth manager Charles Stanley suggests that one in seven young adults expect to inherit money before they turn 35. However, in reality the typical inheritance age is between 55 and 64.
The survey also suggested that young people are expecting to inherit much larger sums of money than they actually do. Some expect to receive nearly £130,000. Staggering! Whereas the median average amount handed down was actually £11,000. That’s a substantial difference!
So, what if you’re living longer and your loved ones will receive their inheritance much later than they expect, or what, if like many people, you aren’t in a position to leave as much as your loved ones might think? What options are available to them?
Help to Buy ISA:
Using a Help to Buy ISA your loved ones can boost their savings by 25%! For every £200 saved per month, up to £3000 a year, with the Help to Buy ISA the government will pay a bonus of £50.
To receive the maximum bonus of £3,000 you’d need to have saved £12,000. But, it gets better, if your loved ones are saving for a home with a partner, they can each have a Help to Buy ISA and therefore both claim the 25% government bonus. That’s an extra £6000!
If your loved ones are looking to boost their deposit they will need to open a Help to Buy ISA before they close to new applicants in November this year. But don’t worry, they will still be able to claim the government bonus up until 2030.
Help to Buy Equity Loan:
The Help to Buy Equity Loan Scheme is another way that the government is helping first-time buyers, this time exclusively for New Build houses and flats. The government could lend your loved ones 20% of the value of their first home interest free for five years, some interest would be payable from the start of year 6. This means they would only need a five per cent deposit and a 75% mortgage to make up the remaining amount.
There are, of course, other ways in which your loved ones will be able to get their first-step onto the property ladder as more lenders look to support this space. Many mortgage providers now offer a range of different options to support families, including being able to use a parent’s savings as a potential deposit or being able to use parental income to boost first-time buyer affordability.
This is why seeking professional advice is so important. Your adviser will be able to tailor their advice to you and your loved one’s specific needs and help you choose the product that’s right for you.
If you’d like to find out the best way for your loved ones to take that first step onto the property ladder contact your adviser today.
Receiving Help to Buy ISA bonus: when you are close to buying your first home, you will need to instruct your solicitor or conveyancer to apply for your government bonus. Once they receive the government bonus, it will be added to the money you are putting towards your first home. The bonus must be included with the funds consolidated at the completion of the property transaction. The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.