Report finds homeowners in the dark about equity release

Background

Wanting to check consumers understanding of equity release products and in particular lifetime mortgages, I set up an independent survey through research company Opinium. Of the 2,000 UK adults surveyed, 780 were over the age of 55, the age of eligibility for a lifetime mortgage.

The results were surprising.

Equity release is a financial product that allows homeowners to access the equity in their homes whilst still living there. It has become increasingly popular in the UK in recent years as a means of supplementing retirement income or funding later-life expenses.

However, according to the survey, a significant proportion of UK adults are misinformed or uncertain about the implications and flexibility of products available when it comes to releasing equity from your home.

Flexibility to move house

The survey found that 24% of all Brits and 13% of over-55s wrongly believe they can’t move house if they have equity release, rising to 18% of Scots aged 55+. In reality, as an equity release borrower you can move house as long as the lender approves the property you intend to move to.

The survey also showed confusion about the ability to move into care, with 19% of all adults believing this was not possible with equity release. The reality is that if you have a lifetime mortgage in joint names and one of you moves into care, the remaining spouse or partner can remain living in the property until they die or also move into care. Only at this point would your property be sold and the loan repaid.

Flexibility to remortgage and switch providers

Another misconception identified by the survey is that 23% of all adults and 12% of over 55s wrongly believe they cannot remortgage or switch providers if they have equity release. In fact, as an equity release borrower you can remortgage or switch providers to get a better deal, but it may be subject to additional fees and requirements.

Flexibility to make repayments

The survey also found that 21% of all adults and 13% of over 55s wrongly believe they cannot make payments or overpayments with equity release. In reality, the Equity Release Council stipulate that all members’ plans must allow you to make payments or overpayments to reduce the overall size of the loan. The size of repayment is usually limited on an annual basis and if you exceed this limitation, you could incur additional fees.

Flexibility to take equity release with an outstanding mortgage

According to my findings, 26% of all adults and 18% of people aged 55+ wrongly think they can’t take equity release if they have an outstanding mortgage on their home. However, you can release equity from your home with an outstanding mortgage, although it may affect the amount you can release and you will need to repay the outstanding mortgage with the money you release.

Flexibility to protect your family’s inheritance

Finally, 27% of all adults and 16% of over 55s believe they can’t have equity release and retain some value in their home to pass on to their family. This is not necessarily the case, as equity release products can offer the option to ring-fence a portion of your home’s value for inheritance purposes.

Our verdict

The results of this survey suggest that there is a need for greater education and awareness around equity release. In particular, it is clear from the study that over 55s need to understand the potential implications of equity release on their ability to move house, remortgage or switch providers, make payments or overpayments, and retain value in their home for inheritance purposes.

If you’re looking for more information or advice on whether equity release is a good idea we have a wealth of articles on this topic.

Ways to contact us

Call 0800 133 7656

Arrange a callback

Try the calculator

Email us