The majority of savers do not understand equity release products fully, despite being aware of their existence, according to Sunlife.
Research by the provider found just one in 10 over-55s who were aware of equity release understood all of the product's features.
One in five (22 per cent) believed that if they took out equity release, they could lose their home or be forced to move out.
However, borrowers have the right to remain in their property until the end of the loan, usually when they die or enter long-term care, if their plan meets the Equity Release Council’s standards, Sunlife said.
Additionally, while any remaining funds after the loan is repaid would go to the estate, one in five (19 per cent) were unsure about whether they could still leave an inheritance after releasing equity from their property.
The research also found that four in 10 (42 per cent) did not know whether they could still move home with an equity release plan.
Products that comply with the Equity Release Council’s standards enable borrowers to move to another property if it is deemed suitable by their provider.
Joanna Leyden, director at Monument, said: “It’s really concerning that so many people have such strong misconceptions of equity release. Product flexibility has evolved massively over the past few years but unfortunately public perception has yet to catch up.
"Many people have an immediate negative reaction to equity release when the reality is that it can provide a lifeline for those who are struggling.
"Independent advice should always be sought rather than approaching a lender directly, a qualified adviser will be able to ensure that equity release is the most appropriate option and ensure the client gets a competitive rate with the product features required.”
However Steve Paterson, later life financial specialist at Later Life Money, said he was “pleasantly surprised” at the level of knowledge clients have in general.
Mr Paterson added: “It appears that clients have a far better understanding than they had even a few years ago. However, there is still room for further education… to ensure clients are reliably informed before any decisions are ultimately made.
"This demonstrates that the need for sound financial advice is still paramount”.
chloe.cheung@ft.com
