Just a third of those over the age of 55 who are aware of equity release realised that they are able to release equity from their home, while having an outstanding mortgage, according to research from SunLife.

When over 55s were asked to correctly identify whether statements were true or false in relation to equity release, 89% gave at least one incorrect answer, meaning that just one in ten completely understand all the features of the product.

Though, SunLife revealed that the biggest misconception about equity release is that, homeowners are only able to take out an equity release plan if they have paid off their existing mortgage. Just 35% of respondents correctly identified that you can release equity, even if you still have an outstanding mortgage, providing you pay off the mortgage with the proceeds.

Furthermore, under half (48%) of respondents were aware that homeowners can still move home if they have an existing equity release plan in place, while only 45% knew that the cash lump received through equity release is tax-free. According to the survey, 44% claimed they did not know whether they would have to pay tax, while 11% were under the impression that they would have to.

Commenting, SunLife equity release service director Simon Stanney said: “It is easy to see why equity release is becoming a popular way for people to fund their retirement. The over 55s are a 'cash poor, property rich' generation, with five times as much money in their property as in their pensions. Our research reveals that two-thirds do not want to downsize, so equity release offers a solution.

“But unfortunately, many people are put off because they don’t fully understand the benefits of equity release.”

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