How inheritance is playing a part in getting people on the property ladder
Some people are banking on inheritance to buy a home, or pay off their mortgage, according to Zoopla. By Vicky Shaw.
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Your support makes all the difference.Coming into some inheritance can make all the difference when it comes to being able to achieve financial milestones, such as getting on the property ladder.
For Kirsty Hamilton, 27, inheritance left by her uncle helped her put down a 50% deposit on a flat.
The operations manager, from Paisley in Scotland, says: “Knowing I had the inheritance meant I didn’t have to worry about saving for my first home. It also allowed me to purchase a property in a nice area.
“We have recently refurbished the bathroom and it’s been nice to do this from a stable position.”
Kirsty also highlights how discussing family inheritance can be worthwhile.
“It is useful to know a ballpark figure of any inheritance you may gain,” she says. “This will help you to manage your life and plan for the future.”
High house prices and jumps in mortgage rates make getting on the property ladder an even tougher feat for some first-time buyers.
Comparing her situation to that of her parents, Kirsty says: “It is 100% harder now than it was for my mum and dad.
“They’ve spoken about how much less they had to make before being able to purchase a property, compared with young people today.”
It is 100% harder now than it was for my mum and dad
Recent research from property website Zoopla, among 2,000 people whose parents own a property, found more than two-fifths (43%) are relying on inheritance. Despite this, only three in 10 (30%) people surveyed have asked their parents how much they are likely to inherit.
While some people told researchers they find it too awkward to discuss inheritance, others said they have checked how much their parents’ property is worth.
Zoopla has a calculator on its website, which can provide an indication of what your property inheritance might be worth.
Some of those surveyed said they had fallen out with family over discussions about inheritance, while others are concerned such talks could spark rifts in the future.
Picking the right moment may help, as could seeking financial advice.
Some people are already making plans for the expected inheritance they are yet to receive, the survey revealed.
Nearly six in 10 (58%) expect to be able to move house, upgrade their home, pay off some of their mortgage, or become mortgage-free.
Some people surveyed were renting until they inherit, while others had purchased their home on the basis that an inheritance would one day help them to pay off their mortgage.
Of course, not everyone is fortunate enough to have money passed onto them by older generations, either as wealth transferred after parents have died or while they are still alive.
Recent analysis from think-tank the Institute for Fiscal Studies (IFS) indicated that the children of university-educated home-owning parents receive around six times more in wealth transfers during their 20s and early 30s than the children of renters.
These wealth transfers between generations often happen when people are buying their first home or getting married, the IFS said.
For those trying to get on the property ladder who do not have the benefit of money being passed down to them to help, Daniel Copley, a consumer expert at Zoopla (zoopla.co.uk), suggests exploring what government schemes are available.
These may vary, depending on where in the UK you live.
He says: “There are several government-backed schemes – some of them not very well known – that can give first-time buyers a helping hand onto the property ladder.”
It may also be worth being open-minded on location and looking for “up-and-coming” places to buy a home.
Copley suggests: “Look for areas that have similar attributes or are adjacent to your preferred area – you might be surprised how much house prices change across relatively short distances.”
Lifetime ISAs can also give people saving for their first home a boost, adding a 25% government bonus onto savings, subject to certain terms and conditions.
People must be at least 18 and under 40 years old to open a Lifetime ISA.