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1 in 10 understands new features and benefits of equity release

11 June 2018

While the majority of homeowners plan to use property wealth to boost their retirement, very few understand all the features of equity release, new research from SunLife has found.

Eight in 10 homeowners over the age of 55 said they would use equity release or downsize to access some of the £280,000 value tied up in their home, but just one in 10 is fully aware of all the features and benefits of equity release.

More than half were not aware they could still move house after taking out an equity release plan on their property, and a significant 85% did not realise they could use equity release to pay off an existing mortgage or other loans, according to the research.

SunLife’s CEO Dean Lamble commented: “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. 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.”

While most baby boomers are mortgage-free, limited borrowing options in retirement and the threat of possible future taxes has prompted increasing numbers of people to choose equity release, the insurance giant said.

Three quarters of homeowners aged 55 and over said the main advantage of equity release is being able to continue living in their own home, while six out of 10 said a tax-free lump sum was one of the top three benefits of equity release.

With two out of five (41%) already providing financial support to their children or grandchildren, almost a third (29%) view providing an inheritance now a key advantage of equity release. When asked how they would choose to spend £100,000, a quarter of homeowners said they would provide a cash gift to their children, while one in five would give money to grandchildren.

More than half (53%) said the prospect of no monthly repayments was one of the main benefits, with homeowners typically free from repaying money or the interest on it until they move into long-term care or die.

Lamble added: “SunLife has invested significantly in an education and awareness campaign to demystify equity release. As with all major financial decisions, it is important that all benefits and implications are known and understood so that customers can reach the right decision for their individual needs. Our research highlighted both misunderstandings and misinformation that could prevent people who would benefit from equity release from enjoying the retirement they’ve always wanted.”

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