Equity release schemes offer the possibility for people who are fifty-five or older to release the money which has accrued in their home. This can provide a flexible financial agreement for those on a fixed income or needing finance for another purpose but unable to qualify for conventional financial products due to their age or income. For many people equity release calculators will allow them to instantly see whether they qualify and the size of lump sum which would be offered.
Why use equity release calculators?
Most online websites for equity release products offer a free calculator to assist their potential customers. This is because the formula to calculate the amount of equity release sum is more complex than you would find with a conventional loan or repayment mortgage. Equity release products will generally require no form of monthly payment so you income level is irrelevant. However, your age, gender and state of health become important factors. They will also consider the current market price your property would command and any existing mortgage which may be secured on the property. Since there are a number of providers offering equity release with slightly different requirements and restrictions, equity release calculators can provide an easy way to compare the marketplace and obtain some figures to assess their plans (visit here for more information).
How do equity release calculators calculate?
Equity release calculators are online tools which calculate their response based on the data you input. It will pose a number of questions and you will need to supply accurate responses. Most calculators will ask questions in a similar manner. These will be based on:
• Your age: Equity release schemes base their figures on your age or if it is a joint application, the age of the younger party. Since younger people have a longer expected lifespan, generally the older the applicant the greater the available sum for release.
• Your health: This is again used to calculate your estimated lifespan. There are a number of companies and providers who offer enhanced deals for those with poorer health. Generally, the poorer your state of health, the more equity can be released. These schemes are normally called enhanced or impaired life schemes. Some companies have offered these for a number of years but recently Aviva and More2Life have launched products designed for those suffering from poorer health.
• The current market value of your home: This works in a similar way to a conventional mortgage since there is a particular loan to value ratio which must be adhered to.
• The current balance of your existing mortgage: This will restrict the amount of equity available in your home. The balance will need to be deducted from the value of your home to determine the amount of equity available in the property.
Will the calculator show my options?
Some of the more sophisticated calculators will allow comparisons of a variety of products and schemes. Once you have entered your information, equity release calculators will confirm your qualification for certain products and schemes and present the options which are best suited to your requirements. This may include:
• Lifetime mortgage: This type of scheme works in a similar way to a conventional repayment mortgage. However, the main exception is that instead of making a monthly payment to cover repaying the loan and interest, the interest is compounded annually on to the balance of the loan. The loan is only paid in full when you move into long term care or become deceased. Your property is then sold and once the loan balance has been settled, any remaining funds pass to your beneficiaries.
• Home reversion plans: These schemes allow home owners to sell all or part of their property but they retain the right to live in the home for the remainder of their lifetime.
Both types of scheme allow for the home owner to obtain a lump sum or an additional income without having to move from your home. The calculator will present these options for you. You can then explore them a little further to calculate whether they would meet your financial requirements.
If you are considering equity release, equity release calculators can be a great way of calculating how much money you could obtain. However, it is still important to consult with professional advice to ensure that you obtain the best possible deal. There are a number of reputable professionals who are members of the Equity Release Solicitor Alliance, who can provide advice on the legal implications of equity release to your estate.
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