Over 50s could be vastly underestimating the value of their home, and potentially overlooking the financial options available to them, according to the latest research from SunLife.
SunLife’s third Life Well Spent report surveyed more than 2,000 people over 50 and discovered that, on average, people over 50 have lived in their homes for 22 years, first purchasing them for an average of just £148,948.
These people estimate that the value of their home today is £334,106 on average – an increase of 124% over the 22 years.
How much are over 50s’ homes really worth?
But those in their 50s seem to be undervaluing their homes. For example, if they bought their house for £148,948 in 2002 and its value increased in line with the national average, it would in fact be worth £377,166 today, as the average house price has actually risen by 153% since 2002.1
This means that, on average, homeowners over 50 could be underestimating the amount of equity they have by £43,060. For the quarter (24%) of people over 50 who have lived in their homes for over 30 years, the increase in value could be even more surprising.
Knowing your home’s real value could open up your financial options
The first step to finding out how much a house is really worth is to get a proper valuation. Once an estimate is in place, the homeowner may have options they didn’t previously realise they had.
For example, downsizing or moving to a less expensive area could free up cash to be spent enjoying a better quality of life in retirement.
For those who don’t want to move, equity release could be a possibility. It could allow them to get the mortgage paid off, gift an early inheritance to their children, or modify their home.
On average, respondents who released equity accessed £62,848 tax-free cash.
57% spent it on home improvements, 33% paid off debts (the money you release must be used to pay off any remaining mortgage), 30% on holidays or travel, 17% on supplementing their income, and 13% on helping out their family financially.
So, for some people who may sitting on more equity than they thought, accessing some of the value of their home could make a big difference to their lives.
Mark Screeton, CEO at SunLife, said: “It’s no secret that house prices in the UK have risen a lot in the last few decades. But despite this, it seems many of us are still underestimating how much our home is worth.”
“Finding out the actual value of a home could open up financial options. For example, 1 in 4 people over 50 worry that they may have to move home in the future, even though they don’t want to. For some of them, equity release could be a way to stay in their own home while accessing the funds they need. But if they’re underestimating their home’s worth, they might not realise that this is an option.”
About equity release
The most popular type of equity release, a lifetime mortgage, is a loan secured against your property. There is nothing to repay until you pass away or move into long-term care, but you can choose to make repayments to cover the interest.
If you’re not making repayments, compound interest can grow quickly, meaning there could be little or no equity left in your home for your estate to inherit. But as long as your product includes a ‘no negative equity guarantee’, your debt can never exceed the value of your home.
Mark concludes: “Of course, equity release won’t suit everyone, so you need to speak to a financial advisor to learn more about the options that are right for you and your circumstances.”
