Parents releasing equity for first time buyers

[Citizen Jake]

Hi guys,

This is kind of related to the news today about First Active's 100pc mortgage product and a passage from the Irish Times where Sarah W (who I think posts here from time to time) has been quoted. It reads: Sarah Wellband, of REA, said there was a big demand for 100 per cent loans. "It's certainly great for parents, who have been funding their children's deposits by releasing equity from their own homes," she added.

I have been saving hard for the past couple of years for a deposit and amidst the struggle - and tears of frustration - my father had mentioned using my (inheritance) equity in the family home as a means of securing a property. I shied away from this route as firstly I wouldn't want to put my parents to any trouble (they're not rich) and secondly simply don't understand what's involved.

Can anyone here tell me how this actually works and is it a legitimate way of going about buying a property.

Citizen

 

[WizardDr]

Your parents - in common with all others - think you are maturing when you sink cash into the purchase of a residence.

They are so anxious, they will borrow on your behalf.

If your folk are under 65, and they own their own house, they can borrow on 'equity release' and gift you the cash. These loans are repayable like any other loan, but the parents often dont make formal arrangements to get the gift repaid.

The Revenue have to accept the 'gift' approach, but are clear that if the additional borrowings are to be repaid by the child, they seem to think that then you may not be a first time buyer.

Gifting is totally legitimate, so dont get hyped about it. Obviously the 100% mortgage is an alternative.

 

[Citizen Jake]

Thanks Wizard,

Not so sure about those equity release products. They have some merits but look like more trouble than they're worth. Can't imagine putting elderly people through the mill with institutions and then enduring the Revenue's oblique take on life. 100pc mortgages are interesting, wait and see.

Citizen