Can I Use Equity Release to Help My Children Buy a Home?

Yes, in most cases you can use equity release to help your children buy a home — the cash you unlock from your property is yours to gift as you see fit. With house prices stretching first-time buyers to their limit, more parents are tapping into the value of their own homes to give that first leg-up. In fact, around 13% of equity release customers now put the money towards gifting to family.

That said, releasing equity to fund a deposit isn’t a decision to rush. It affects your estate, it can carry tax implications, and it’ll shrink what you leave behind. So before you sign anything, it’s worth understanding exactly how it works — and what the alternatives are.

Here’s what this guide covers: how equity release works for gifting a deposit, the tax rules around gifted money, the risks worth weighing, the alternatives, and where to get proper advice.

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Can You Use Equity Release to Help Your Children Buy a Home?

Short answer: yes. Equity release lets homeowners aged 55 and over unlock tax-free cash from their property without having to sell up or move out. Once that money lands in your account, it’s yours — you can gift it to your son or daughter for a house deposit, hand it over as an early inheritance, or help cover their moving costs.

It’s become a genuinely common route. The equity release market grew to £2.57 billion in lending across 2025, and the “Bank of Mum and Dad” is now one of the biggest funders of first-time purchases in the country.

The most popular form by far is a lifetime mortgage, which makes up more than 99% of the equity release market. You borrow against your home, keep full ownership, and there are no monthly repayments unless you choose to make them. The loan plus interest is repaid when you pass away or move into long-term care — usually from the sale of the property. You can read more on our equity release and lifetime mortgages page.

How Does Equity Release Work When Gifting a Deposit?

The process is fairly straightforward, though every step should go through a qualified adviser. Here’s roughly how it plays out:

1. Check your eligibility. You’ll need to be at least 55, own your home (or have only a small mortgage left), and your property needs to meet the lender’s minimum value.
2. Get advice and a valuation. An equity release adviser reviews your situation, your home is valued, and you’re told how much you could release. As a rule, the older you are and the more your home is worth, the more you can typically unlock.
3. Receive your tax-free lump sum. You can take the money as a single lump sum or set up a drawdown facility, where you release smaller amounts over time and only pay interest on what you’ve actually taken.
4. Gift the money to your children. Once the funds are with you, you pass them on. It’s sensible to record the gift in writing — a simple deed of gift — so there’s a clear paper trail for the lender and for tax purposes.

Worth knowing: your children will usually still need their own mortgage on top of the deposit you provide. A bigger deposit often means they can access a wider range of deals, so the help you give can stretch further than the cash alone.

Gifting, Inheritance Tax and the Seven-Year Rule

This is the part that trips people up, so it’s worth getting right.

Money you gift to your children is treated by HMRC as a Potentially Exempt Transfer (PET). If you live for at least seven years after making the gift, it falls completely outside your estate and there’s no Inheritance Tax to pay on it. Die within those seven years, though, and the gift may be counted as part of your estate.

A few figures worth knowing:

• Inheritance Tax applies to estates worth more than the £325,000 nil-rate band, and is charged at 40% on the amount above it.
• You can gift up to £3,000 each tax year free of Inheritance Tax under the annual exemption, and you can carry forward one unused year — so a couple could gift £12,000 between them with no strings.
• If you die between three and seven years after a larger gift, taper relief can reduce the tax due on a sliding scale.

There’s one more wrinkle. Because equity release reduces the value of your estate, it can actually lower a future Inheritance Tax bill — the money is no longer “in” your estate. But that’s a side effect, not a reason on its own to release equity. Tax planning of this kind should always be checked with a financial adviser or solicitor.

A quick note on protection: some families take out a life insurance policy written to cover a gift, so that if the worst happens within the seven years, the policy pays any potential tax bill rather than the children.

Weighing Up the Risks and Trade-Offs

Equity release can be the right call for some families, but it comes with genuine downsides you need to go in with eyes open:

• It reduces your estate. The loan and rolled-up interest are repaid from your home when you die or go into care, so there’s less to pass on. Equity release will reduce the value of your estate.
• Interest compounds. With a lifetime mortgage, interest is added to the loan each year. Over a long period that can grow significantly, although making voluntary repayments can keep it in check.
• It may affect means-tested benefits. Holding a large lump sum, or gifting it, can affect your entitlement to means-tested benefits such as Pension Credit.
• Deprivation of assets. If you give money away specifically to qualify for benefits or reduce future care costs, your council can treat it as “deliberate deprivation” and count it as though you still had it.
• It’s a long-term commitment. Repaying a lifetime mortgage early can trigger early repayment charges, so it’s not something to unwind on a whim.

The reassuring part: plans from Equity Release Council members come with built-in safeguards — including a no-negative-equity guarantee, which means your estate will never owe more than your home is worth.

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Alternatives to Equity Release for Helping Your Children

Equity release isn’t the only way to give your children a hand. Depending on your age and finances, one of these might suit you better:

• Gifting from savings. If you have cash set aside, gifting it directly avoids interest costs entirely.
• Remortgaging. If you’re younger or still working, a standard remortgage to release some equity could work out cheaper than a lifetime mortgage.
• A guarantor or joint mortgage. Some lenders let you support your child’s application using your income or property, boosting how much they can borrow without you handing over cash.
• A family offset mortgage. You place savings in a linked account to reduce the interest your child pays, and you keep access to your money.
• Downsizing. Selling and moving somewhere smaller frees up equity without taking on any new borrowing.

Each route has its own pros and cons, and the right one depends entirely on your circumstances. This is exactly where speaking to a whole-of-market adviser pays off.

How UK Mortgage Finder Can Help

Helping your children onto the ladder is a big, generous step — and you shouldn’t have to figure it out alone. UK Mortgage Finder connects you with FCA-regulated, whole-of-market advisers who specialise in equity release and later-life lending.

There’s no cost to get started and no obligation to proceed. An adviser will look at your situation, explain whether equity release or one of the alternatives makes more sense, and walk you through the figures in plain English — so you can make the right choice for your family.

Book a free consultation today →

Frequently Asked Questions

Can I use equity release to give my children a deposit?
Yes. Money released from your home is yours to gift, and using it for a child’s deposit is one of the more common reasons people choose equity release. It’s wise to record the gift with a deed of gift.

How much can I release from my home?
It depends on your age and your property’s value — generally, the older you are and the more your home is worth, the more you can unlock. An adviser can give you a personalised illustration. The average amount released in late 2025 was around £123,000.

Do my children pay tax on gifted money?
There’s no tax to pay at the point of the gift, and no “gift tax” in the UK. The money could fall within your estate for Inheritance Tax if you die within seven years, but your children don’t pay income tax simply for receiving it.

What is the seven-year rule?
If you live for seven years after gifting money, the gift is completely free of Inheritance Tax. Die within seven years and it may count towards your estate, though taper relief can reduce the tax on gifts made three to seven years before death.

Will equity release affect my benefits?
It can. Releasing a large sum, or holding it in savings, may affect means-tested benefits such as Pension Credit. An adviser will flag this before you proceed.

Can I still leave an inheritance if I use equity release?
Yes, though it’ll be reduced. Some plans let you ring-fence a portion of your home’s value as guaranteed inheritance, and making voluntary interest payments slows how fast the loan grows.

What age do I need to be for equity release?
You typically need to be at least 55 for a lifetime mortgage. On a joint plan, both homeowners usually need to meet the age requirement.

Is it better to remortgage or use equity release to help my children?
It depends. If you’re still working and earning, a remortgage may work out cheaper. If you’re retired and want no monthly repayments, equity release might fit better. A whole-of-market adviser can compare both for you.

Using equity release to help your children buy a home can be a wonderful way to see them settled while you’re still around to enjoy it. The cash is tax-free to release and yours to gift — but the decision touches your estate, your benefits and your long-term finances, so it’s never one to take lightly.

The smartest first move is a no-obligation chat with a regulated adviser who can run the numbers for your own situation. Get expert advice — it’s free →

Important: This article is for guidance only and does not constitute financial advice. Equity release is a lifetime mortgage or home reversion plan. To understand the features and risks, ask for a personalised illustration. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. Think carefully before securing other debts against your home. You should seek independent advice from an FCA-regulated adviser before making any financial decisions. UK Mortgage Finder introduces customers to FCA-regulated mortgage and equity release brokers and advisers.