More than half of homeowners aged 55 plus did not realise they could move house after taking out an equity release plan on their property.
More than half of homeowners aged 55 plus did not realise they could move house after taking out an equity release plan on their property.
That is according to research by SunLife which has uncovered several knowledge gaps surrounding equity release which could be providing a barrier to baby boomers enjoying a much-needed income boost in retirement.
Among the discoveries it unearthed evidence 85% of homeowners in this age group did not realise they could use equity release to pay off an existing mortgage or other loans.
It said that while eight in ten homeowners would use equity release or would downsize to access some of the equity in their home, only one in ten was fully aware of the features and benefits.
Advantages
However the study also revealed evidence that over-55s, of whom one in five were asset-rich and cash poor homeowners and struggling financially, saw many advantages to equity release.
It meant, for one, they could continue living in their own homes, said SunLife. In fact, one in three homeowners aged 55 plus saw this as the main advantage because it avoided the stress and expense of downsizing.
Six out of ten baby boomers saw the tax-free lump sum as a benefit. Some schemes allowed customers to use a ‘drawdown’ facility to access money as and when needed. SunLife said charging interest on the cash released was seen as a big bonus by two out of five over-55 homeowners who would mainly use the money for home improvements or to pay off debt or loans.
Many were also keen to share the money with their family with one in four saying they would spend a £100,000 windfall by giving it as a gift to their children.
But factors such as limited borrowing options in retirement and the threat of future age-related taxation aimed to boosting living standards of younger generations has also increased the popularity of equity release.
Indeed, SunLife said, years of rising house prices had meant many homeowners had built up enough wealth in their property to pay off debts, top up pensions or provide higher standards of living in retirement.
Advice
Dean Lamble, CEO of SunLife, said: “The idea of using equity release to clear an existing mortgage and of no future repayment is increasingly attractive for older homeowners to boost their retirement pot.”
He added: “Unlocking a tax-free lump sum from your home is one of the biggest financial decisions that someone in their 50s, 60s or 70s could make, and homeowners understandably want to involve the whole family.
“Our equity release guide includes practical advice and suggestions to help homeowners and their families make well-informed decisions about what equity release has to offer, so they can decide whether it is suitable for them.”
