Half of over 55s unaware of tax free equity release lump sum

More than half (55%) of homeowners aged 55 were unaware that the cash lump sum they would receive from releasing equity in their home is tax free, according to a recent survey conducted by SunLife.

The firm also revealed that when looking at those aged between 55 and 65, this percentage rocketed to 64%, despite three in ten claiming that they would consider taking out an equity release loan if they needed a cash lump sum.

The research from SunLife further found that 52% of those surveyed did not realise that you are able to move home if you take out equity release, and 65% were unaware that you could release equity even if you had not repaid your mortgage in full.

SunLife equity release service director Simon Stanney said: “Three in ten over 55s would consider equity release, and it is possible that many more would too if they understood the product properly.

“But 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.

“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.”

The survey further highlighted that homeowners aged 55 believe their homes are worth an average of £290,659 with most of them having owned the property for over 20 years, when the average home was worth £51,633, representing an increase in value of £239,026.

“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 concluded.

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