Misplaced fears about equity release mean many retirees are unnecessarily limiting their options when it comes to looking at ways to boost their income in their retirement.
According to a new survey by Aviva, while more than a third of over-55 homeowners (39%) recognise the potential benefits of using their properties to release extra cash in retirement, only 15% would actually consider taking out an equity release product.
The research found that while over-55s feel they have a strong overall understanding of equity release (82%), many remain confused by how the products work. One in ten (10%) over-55s said equity release is something to do with releasing money from a home, but they did not know how.
Meanwhile, more than a quarter (27%) thought equity release involves selling their home and effectively living in it as a tenant until they die (this only occurs in the much older equity release products that now account for about 1% of plans currently sold).
This lack of understanding may explain why 21% of those who have no plans to take out equity release say they fear losing their homes. And almost half (46%) of these say they will not dip into the value of their homes because they want to pass on their properties in full as inheritance.
Today, most equity release products are sold as lifetime mortgages that allow customers to take out a loan against their property and do not affect ownership. In addition, many products also allow people to ring-fence some of their property value so that they can pass it on as inheritance.
Although it appears some educating over the pros and cons of equity release would not go amiss, the research comes shortly after the equity release market recorded its busiest quarter in almost a decade.
According to the Equity Release Council, total equity release lending reached £25.6 million in the second quarter of 2014, 32% more than in the same period in 2013 and the largest quarterly amount since Q4 2014.
With 5,275 new equity release customers in the quarter, 10% more than in the first three months of the year, the total number of customers in 2014 has now surpassed 10,000. And with house prices on the rise, the average amount released exceeded £61,000 over the quarter, 16% more than in the same period in 2013.
Drawdown plans, which allow the gradual release of funds to limit the build-up of interest, accounted for 59% of sales, while lump sum mortgages, which involve a lump sum being taken at the outset, accounted for 41% of sales.
Are you looking to unlock a proportion of the value – or equity – you have in your home? Equity Release could be the solution for you.
Speak to an adviser directly by simply calling 01737 233462 and quoting MFER04
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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