Research suggests UK home owners are unaware of what equity release offers
More than half of home owners in the UK aged 55 are unaware that the cash lump sum they would receive from releasing equity in their home is tax free, a new survey has found.
Despite the fact that three in 10 would consider taking out an equity release loan if they needed a cash lump sum, just 11% fully understand all equity release product features, the research from SunLife also found.
Overall some 55% didn’t know the lump sum was tax free, rising to 64% of those aged 55 to 65 while 52% didn’t realise you can still move home if you take out equity release and 65% didn’t know you could take out equity release even if they still have a mortgage.
Simon Stanney, equity release service director at SunLife, believes at a time when the number of people taking out equity release continues to rise, more would do so if they understood the product properly.
‘We are in a situation where over half of homeowners age 55 and over think the cash sum would be taxed, that they would be stuck in the same home if they did equity release and that it is not possible to do equity release if you still have a mortgage, which 18% of over 55s do,’ he sid.
‘Our research shows that one in five over 55s say they feel worse off, financially, than they expected to be at their age. However, many have got a lot of equity tied up in their homes,’ he added.
Indeed, the research shows that home owners aged 55 believe their houses are worth £290,659 on average. Most have had their homes for more than 20 years, when the average home was worth £51,633, which means an increase in value of around £239,026.
Downsizing offers a solution, but the research also show that two thirds of over 55s don’t want to move, rising to 71% for those aged 70 and over.
‘This is a generation that are generally property rich and cash poor due to healthy increase in the value of their homes, but inflation eating away at pension pots and increased living costs. But 62% of those surveyed said they categorically did not want to downsize, which means the solution for the majority could be to unlock some of the value in their homes via equity release,’ Stanney added.