However, despite these misconceptions people have not ruled out equity release, with 49% saying equity release should be explored as a retirement planning option and one in five (20%) saying they intend to use equity release products in the future.
The list below shows the most common myths about equity release as revealed by the research:
1 You risk losing your home (69% of UK consumers believe this)
Truth – You can remain in your property for life provided the property remains your main residence
2 You won’t be able to leave an inheritance (67%)
Truth – When you die or move into long-term care, your home is sold and the money is used to pay off the loan. Anything left over goes to your beneficiaries
3 You won’t be able to move home (52%)
Truth – You have the right to move your plan to another suitable property without any financial penalty
4 Equity release is unsafe and unregulated (47%)
Truth – As regulated companies, all SHIP members must abide by a strict complaints procedure to satisfy the Financial Services Authority
5 Your children will have to repay the loan themselves (43%)
Truth – You will never owe more than the value of your home and no debt will ever be left to the estate
Lifetime mortgages are the most widely recognised equity release product (64%) when compared to home reversions. Worryingly however, 40% of people mistook sale and rent back as being a type of equity release. Sale and rent back involves individuals, who are often those facing financial difficulties, selling their home at a discount in return for the right to remain in their property for a set period. The key differences with equity release are it is not necessary to sell your home and you can remain in your property until you go into care or die.
However, it was positive to find that just 35% of consumers believe equity release is an option of last resort and 52% of people realise that using equity release won’t mean that they will get into debt.
Sources of information
And in terms of how consumers would look for information on equity release, 67% said they would look on the internet, followed by 47% who would approach a financial adviser (rising to 60% of 65-74 year olds) and 23% who would ask their bank. Interestingly, just 8% would look to the media for guidance.
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.
"It is really encouraging that income in retirement has risen up the political and media agenda in recent months as it will cause more people to consider what they are doing to prepare themselves for retirement. The earlier people begin thinking about this the higher their standard of living is likely to be.
"People can draw confidence from the knowledge that equity release is an activity regulated by the FSA and products offered by members of SHIP offer a number of guarantees which mean you can remain in your home until you decide to leave, and you will never owe more than the value of your home."
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