How much has your house made you?
It’s an interesting question, with varying answers depending on when and where you purchased property.
For the post-war baby boomer generation, usually defined as born between 1946 and 1964, house price growth will have accounted for a substantial part of their wealth, in many cases.
Whilst it’s important not to make generalisations about an entire generation of people, those we call baby boomers are often thought of as a ‘fortunate generation’, with rising property prices combined with gold-plated final salary pensions.
Some new research by SunLife demonstrates just how much the post-war generation could have benefited from rising property prices.
They found that average person aged 55 years or older has lived in their current home for 24 years, during which time it has more than tripled in value.
The average baby boomer has £289,000 of equity in their home Share on XAccording to SunLife, most of this generation has paid off their mortgage, typically making their final mortgage payment when they were 54. On average though, they have an outstanding mortgage balance of just over £8,300.
As a result, on average, they have around £289,000 in equity within their property – a substantial sum of money that could prove handy in retirement and later life.
When SunLife asked this cohort how much extra cash they would need before they felt truly comfortable, in a financial sense, the answer was £184,000. This means they have around £100,000 more in equity in their property they than need to feel financially comfortable.
According to Dean Lamble, CEO and SunLife:
Equity release is becoming an ever more popular way for people to fund the retirement they want.
With the average equity that someone over 55 has standing at £280,000, it’s clear that equity release is worth considering as a way to get hold of money for home improvements, to pay off an existing mortgage so there’s more money each month, or to give children some of their inheritance early, perhaps to help them get on the property ladder.
Here at Informed Choice, we don’t advise on equity release, instead referring clients who need advice on this specialist subject to a third-party adviser.
We do however recognise that many asset-rich, cash-poor baby boomers will want to explore the option of equity release in later life.
Accessing the value of the cash within your home is the right option for some, although not everyone. We believe it’s an option that should only be explored as part of a comprehensive financial planning exercise, to truly understand its impact on your own financial position and any inheritance you plan to pass on to future generations.
Going back to the SunLife research, it was interesting to see that the over 55s had an excellent understanding of how much their homes were worth, knowing how much they had gone up in value since purchase.
Dean Lamble continued:
You might not expect someone who’s lived in the same house for 24 years without moving to be particularly close to their home’s value, but our research found that while their home is worth on average £289,000, their estimate was £290,000 – just £1,000 out.
That’s pretty accurate for someone who isn’t actively looking to move home or put their property on the market!
If you’re interested in how much your home is worth and how much money it has made you, one free tool we often use is Mouseprice.com.
Take any online valuation with a pinch of salt though; these tools use local trends and comparable sales prices, lacking the sort of local market knowledge used by estate agents to more accurately value properties.
And even if the value that comes back is more than you expected, please don’t get excited and rush straight off to your nearest equity release broker!
The value of your home is only part of your overall financial planning, and is first and foremost your house is a place to live in retirement.
