Equity release misconceptions stop some retirees who could benefit from raising money tied up in their home from accessing the cash.
Many believe equity release is a shady financial retirement planning choice because they confuse equity release with other financial products, says Safe Home Income Plans (SHIP), the trade body for equity release providers.
A SHIP study explodes some myths about equity release that are simply untrue:
• Equity release borrowers do not risk losing their home – 69% of homeowners planning for retirement believed this despite providers letting borrowers stay in their homes for as long as they want, providing the property stays their main home.
• Around 2 out of 3 people wrongly believed they could not leave their home as an inheritance to their family or loved ones. In most cases, the property is sold to repay any loan when the borrower moves in to long-term care or dies. Any balance is paid out as an inheritance.
• Equity release borrowers can move to another home without financial penalty, although half of homeowners (52%) believed they could not
• Many homeowners (47%) believe equity release is a wild and unregulated industry where their home was at risk if they borrowed against it, when all equity release companies are regulated by the Financial Services Authority.
• Family or loved ones could end up with a financial millstone from equity release if a property sale does not repay the borrowing is a worry for many (43%). The truth is an equity release loan can never add up to more than a home’s value and no debt is passed on to an estate.
• Many homeowners (40%) mistake equity release for sale-and-rentback, which are different products. Sale-and-rentback is often a financial deal of last resort for someone facing home repossession and has no links with equity release.
Director General of SHIP, Andrea Rozario, said: “The government’s proposed changes to retirement provision and the rising cost of living over the last year has increased the awareness of the role equity release can play in terms of retirement financing. However, it is clear there is still much work to be done to overcome misconceptions about these products.”
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