Bank of Mum and Dad: Remortgaging and Equity Release Explained

Parents who want to help their children buy a home often look at ways to access capital from their own property. For many, this means either remortgaging or using equity release.

Both routes can work well in the right circumstances, but each has its pros and cons. This is not just for the parents, but also potentially for the children receiving the gift.

In this guide, we’ll explore the key differences, the risks, and the practical points to think about before making a decision.

Remortgaging to Gift

A remortgage simply means replacing your existing mortgage with a new one, either with your current lender or a new provider. The purpose here is to release a lump sum of capital that can then be gifted to your child as a deposit.

Pros for the Giftor (Parent)

• You retain ownership of your home.
  
• You can benefit from potentially lower interest rates or better terms if you switch lender.
  
• You could keep other funds invested (i.e. savings, pensions, investments)
  

Cons for the Giftor

• The monthly mortgage payments will increase if you’re borrowing more.
  
• The new borrowing will be secured against your home—so repayments must remain affordable, especially if you are near or in retirement.
  
• It may reduce your future borrowing capacity or flexibility for other plans.
  

Pros for the Giftee (Child)

• The gifted funds can boost the deposit and improve access to better mortgage rates.
  
• It can help achieve a higher loan-to-value product at a lower interest rate.
  
• It may enable homeownership sooner than would otherwise be possible.
  

Cons for the Giftee

• Lenders require the gift to be unconditional and non-repayable, which may impact future inheritance expectations.
  
• Some lenders will still check the source of funds carefully, which can add time to the process.

Equity Release to Gift

For those aged 55 and over, an alternative could be equity release, typically through a lifetime mortgage. This allows you to access the value of your home without needing to make monthly repayments (unless you choose to).

Pros for the Giftor

• No mandatory monthly repayments—interest can roll up and be repaid when the home is sold or on death.
  
• You can remain living in your home for life.
  
• Can be a flexible way to help children financially while maintaining your lifestyle.

Cons for the Giftor

• The interest can compound over time, significantly reducing the estate’s value.
  
• It can affect eligibility for means-tested benefits.
  
• Longer early repayment charges could apply if circumstances change.
  
• It may reduce the inheritance left to beneficiaries.

Pros for the Giftee

• Allows access to funds when they’re most needed—often before inheritance is available.
  
• Can make the difference between renting and owning.
  
• Enables parents to see the benefit of their gift in their lifetime.
  

Cons for the Giftee

• It can create family tension if siblings feel treated unequally.
  
• The future inheritance they might receive will likely be reduced.
  
• It’s important that the giftee understands that the gift is unconditional.

Inheritance Tax Considerations

Helping children financially during your lifetime can have Inheritance Tax (IHT) advantages. However, it’s important to understand how the rules work.

Potential Pros

• Reducing the size of your estate:
  Gifts made during your lifetime can reduce the overall value of your estate, which may in turn reduce the IHT payable on death (currently 40% on the portion above the nil-rate band).
  
• Potentially Exempt Transfers (PETs):
  Gifts made outright to your children are generally classed as PETs. If you live for seven years after making the gift, the value of that gift is usually exempt from IHT.
  
• Using annual exemptions:
  You can give up to £3,000 per tax year (and small gifts of up to £250 per person) without them being counted towards your estate for IHT purposes.

Possible Cons

• The seven-year rule:
  If you die within seven years of making a large gift, part or all of that gift may still be counted for IHT, depending on timing and size.
  
• Gifts made from equity release:
  Borrowing to fund a gift does not automatically remove that value from your estate. The debt may reduce your estate’s value, but the gifted funds could still have IHT implications depending on how they’re used.
  
• Deprivation of assets:
  For those who might require long-term care in the future, gifting assets (especially from equity release) could be seen by local authorities as deliberate “deprivation of assets,” which can affect entitlement to support.#

It’s important to get specialist IHT advice from a suitably qualified IFA / Estate Planner before proceeding.

Which Option Is Best?

There isn’t a universal answer. The best route depends on:

• The parents’ age and financial position.
  
• Whether ongoing repayments are affordable.
  
• Long-term plans for the property and inheritance.
  
• The tax implications of gifting (including potential Inheritance Tax considerations).

It’s always important to seek both mortgage advice and independent legal and tax advice before proceeding. The right structure can make a significant difference to cost, flexibility, and family outcomes.

Final Thoughts

The Bank of Mum and Dad plays an increasingly vital role in helping younger generations onto the property ladder. Whether through remortgaging or equity release, both can be effective solutions when used responsibly.

The key is to understand the implications for everyone involved. This means financially, legally, and emotionally, before making a commitment.

Risk Warnings and Disclosures

Your home may be repossessed if you do not keep up repayments on your mortgage.

This is a lifetime mortgage. To understand the features and risks, please ask for a personalised illustration.

There may be a fee for mortgage advice. The precise amount will depend upon your circumstances.

Symmonds de Lacey is a trading style of Easy Street Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Company number 6430453. Registered address: Basepoint, 377-399 London Road, Camberley, Surrey, GU15 3HL.

Please note, we are not tax advisers. For tax advice, please speak to a qualified tax professional.

Information correct at time of writing – November 2025.