Remortgaging to provide a deposit for a daughter

The starting point

A retired couple in their early 60s wanted to help their 30-year-old daughter buy her first home. At the time, they owned their property outright, with no mortgage.

Their property was valued at £550,000. The daughter was looking at a purchase price of £335,000, but based on her income she could only borrow £240,000—leaving a funding gap that included the deposit and associated costs.

Why adding the parents to the mortgage wasn’t workable

The couple had previously been advised that they could potentially go on the mortgage with their daughter. However, the structure available would have restricted the mortgage to an 18-year repayment term.

Even though the parents had strong income, the shorter term would have made the monthly repayments unaffordable for the daughter’s situation. The couple needed a solution that improved affordability without forcing a short repayment period.

The clients’ wider plans

The couple also expected they may sell their current home within around 10 years and trade down to a smaller property nearer the coast. That meant any borrowing needed to be compatible with a likely change in circumstances.

They had good pension income and no significant outgoings beyond normal day-to-day living expenses.

The remortgage solution

To create the funds for the daughter’s deposit, the couple remortgaged their property to release £100,000.

This allowed them to gift the difference needed for the purchase, supporting the daughter’s application while keeping the mortgage payments within affordability.

A key part of the strategy was arranging the new borrowing over a 35-year term, which helped spread the repayment burden over a longer period.

Choosing the right repayment structure

They were presented with two repayment structure options:

• Repayment basis over a 20-year term
• Interest-only over a 20-year term

After considering the costs and their future plans, they selected the interest-only option. They also had the ability to make up to 10% overpayments per year, providing flexibility if they wanted to reduce the balance over time.

Considering equity release (and why it wasn’t the best fit)

At the outset, equity release was also considered. However, once the full picture was assessed—particularly the couple’s income position, expected timeframe for potential sale, and the need for a structure that aligned with affordability and flexibility—equity release was identified as not the most suitable solution for their circumstances.

In this case, a conventional remortgage/further advance approach offered a more appropriate balance between funding the deposit and managing the mortgage in a way that fit their plans.

Key takeaways from this case

• A deposit gap doesn’t always need a new buyer arrangement. Where parents have equity, a remortgage can sometimes be a practical way to fund a deposit.
• Term length can be central to affordability. Extending the mortgage term helped keep repayments manageable.
• Repayment structure matters. Interest-only with permitted overpayments offered flexibility alongside affordability.
• Equity release isn’t automatically the answer. For some families, a remortgage/further advance can be a better fit than equity release once the details are compared.

Conclusion

Getting onto the property ladder can be challenging for first-time buyers, particularly when deposits are harder to fund. In this scenario, the parents were able to use the equity in their mortgage-free home to support their daughter’s purchase.

Even where parents are not currently on a mortgage, it may still be possible to access funds through a remortgage or further advance—provided the structure is tailored to affordability and the family’s likely future plans.