Many homeowners over 50 may be “vastly” underestimating the value of their properties, potentially overlooking financial opportunities according to new research.
The study by SunLife found that these homeowners could be sitting on an extra £43,000 in equity, on average – money that could help cover mortgage costs, fund home improvements or improve their quality of life in retirement.
SunLife’s latest Life Well Spent report, which surveyed over 2,000 people aged 50 and above, found that most respondents have lived in their homes for around 22 years.
These homes were originally purchased for an average of £148,948, and homeowners now estimate their properties to be worth £334,106 on average – a 124% increase.
However, SunLife suggests these estimates may be too modest. If a home purchased in 2002 for £148,948 grew in value in line with the national average, it would now be worth £377,166, reflecting a 153% rise in house prices, according to the Land Registry House Price Index.
This suggests that homeowners may be undervaluing their properties by an average of £43,060.
For the quarter of over-50s who have lived in their homes for more than 30 years, the discrepancy could be even greater.
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, one in four people over 50 worry that they may have to move home in the future, even though they don’t want to.”
The first step to uncovering these opportunities is to get a professional valuation. Homeowners who uncover their property’s true value may find they have options they hadn’t previously considered.
For some, downsizing or relocating to a less expensive area could unlock cash to improve their retirement. Others may explore equity release, which allows homeowners to access the value of their property without moving.
Mr Screeton said: “For some, 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.”
On average, homeowners who released equity accessed £62,848 in tax-free cash. Many used the funds for home improvements (57%), debt repayment (33%), holidays (30%), income supplements (17%), or family support (13%).
The most common form of equity release, a lifetime mortgage, is still a type of debt. Homeowners can choose to make payments covering the interest or opt for no repayments at all, which allows them to use their income for retirement expenses instead of debt.
The loan is repaid through the home’s sale upon the homeowner’s passing or a move to long-term care. For those who make no repayments, however, compound interest can grow quickly, potentially reducing the home’s equity for heirs. Nonetheless, with a “no negative equity guarantee,” the debt will never exceed the property’s value.
Mr Screeton added: “Equity release won’t suit everyone. You need to speak to a financial advisor to learn more about the options that are right for you and your circumstances.”
