When you are struggling with a difficult financial situation, it can make life very stressful. This is especially the case for retired people who have few additional income sources available to them. They have lost the possibility for a pay rise at their corporate career and in tough economic times will have few opportunities for working and gaining another income. Many retired people find that their carefully made pension plans have failed to hold up against inflation and the increased cost of living, so are struggling to maintain their lifestyle on their fixed income. However, equity release can assist home owners who have their financial assets tied up in their home.
Rather than needing to sell their property and move into a smaller home, equity release allows home owners to obtain a cash sum while retaining the right to live in their home for the rest of their lives. Many retired people are hesitant to approach a financial adviser about equity release until they know more about whether it could be the solution for their requirements. However, online lifetime mortgage calculators can be a quick and easy way to find out more.
Why Use Lifetime Mortgage Calculators?
Many people are wary about being pressured by brokers and advisers when they are unsure about the concept of a financial product. The internet has made a great number of people more independent, allowing them to research their options initially before approaching a broker or adviser. Lifetime mortgage calculators can be a helpful tool to determine if you would qualify and the amount of equity which could be released. Some of the more in depth models also provide financial information, interest rates and details of plans which may be suited to your needs. This can enable people to get a good idea of whether the sums available for release would be enough for their plans. This information is essential before moving forward with an application.
What Information is Required for the Calculator?
Lifetime mortgage calculators will require a number of personal and financial details relating to you and your home. These will include:
• Current market value of the home
• Balance of any outstanding or existing mortgage secured on the home
• The age of the applicant or applicants
• Details of any health or medical conditions which may impair the applicant’s life expectancy.
The calculator requires this information to apply them to a standard mathematical formula. The amount of available equity is calculated by subtracting any mortgage balance from the value of the home. Your personal information is used to create an estimate of your potential lifespan. This is needed because lifetime mortgages are designed to run for the rest of your life. Just as a life insurance company would provide a quotation based on your age and health, the lifetime mortgage calculator will work out your estimated lifespan and therefore the estimated duration of the policy.
What Restrictions Are Applied to the Calculator?
Firstly, the calculator will ensure that you meet the age restriction of being over fifty-five. People under this age are ineligible for equity release. There are also other restrictions which are worked into the lifetime mortgage calculator's software. These include a specific loan to value ratio for the release. There has to be sufficient equity available to qualify for an equity release scheme. Additionally, there are restrictions and limits set for the amount of equity released per age group. Generally, those people who are older and in poor health will be offered the largest amount of equity release. People aged fifty-five and in excellent health may still qualify for equity release but they may find that they are not offered a particularly large sum.
This is because there are no repayments for lifetime mortgages and the interest is simply compounded onto the balance of the mortgage. This will mean that the longer a mortgage runs, the more interest will be accrued. Equity release companies need to ensure that should you enjoy decades of healthy living, there will be sufficient equity left in the property to repay the mortgage when you eventually die.
If you are considering equity release, lifetime mortgage calculators can provide an excellent first step in researching your options. While a calculator cannot replace professional advice, it can allow you to check your options without obligation or pressure. There are numerous calculators available to check the maximum release possible, but it is worthwhile checking the details of at least four or five to ensure you have a fuller picture of the wider equity release market. Once you have done this, you can proceed with confidence that it is the right option for you.
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