Homeowners in the dark over tax-free benefits of equity release

The cash lump sum that homeowners can get from equity release is tax free. But more than half of all homeowners over the age of 55 have no idea they won't have to pay the Exchequer a penny from equity release.

Research by insurer SunLife revealed that three in 10 over 55s would consider an equity release to get their hands on the finance locked into their property.

But 55 percent of those quizzed had no idea the lump sum they'd receive would be tax free, while 52 percent didn't know they could move home with equity release with 65 percent in the dark that they could access equity release even when they still had a mortgage.

Overall 11 percent of those who took part in the research admitted they didn't fully understand equity release products.

Simon Stanney, equity release service director at SunLife, said: "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 percent 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.

"This is a generation that are generally property rich and cash poor due to healthy increase in the value of their homes, but inflation is eating away at pension pots and increased living costs. But 62 percent 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."

Equity release allows homeowners over the age of 55 to access the cash or equity in their home, either as a lump sum or in several smaller amounts.

Homeowners can take out a lifetime mortgage secured on their property or sell part or all of their home to a home reversion provider in return for the lump sum.

Interested in equity release? Talk to Homeward Legal's expert team on the conveyancing services required. We are available seven days a week on and work with experienced property lawyers across England and Wales.