Equity release can provide an excellent solution for a number of home owners with limited income and in need of a cash lump sum. However, the development of the equity release market has meant that there is now an amazing variety of different products and types of lifetime mortgage. Calculators are often provided on company websites to provide examples and figures to make your decisions easier. However, it is important that the calculators you are using offer the information for all your available choices.
Different Types of Equity Release Schemes
There are a number of different equity release products but a great many of them are types of lifetime mortgage. Calculators will often quote for lifetime mortgages but may not offer the alternatives. There are three basic types of equity release:
• Home reversion plans: These are plans which allow a home owner to sell all or part of their home to the home reversion company while retaining the right for lifetime tenancy. This type of plan is usually only available to those aged over sixty-five and are considered to be a more suitable alternative for those who want more control over what equity will be left for their beneficiaries.
• Standard lifetime mortgage: This is one of the most common types of lifetime mortgage. Calculators will often use these types of schemes as the default product for equity release. It is similar to a conventional repayment mortgage in that you can borrow a certain percentage of the value of your home but unlike a conventional mortgage there is no monthly repayment, so there are no restrictions on your income. Instead of the interest being paid off each month, it accumulates and is compounded onto the mortgage balance. The total balance is only due for repayment at the end of your life or if you move into a facility of long term care. At this time your property is sold and the proceeds are used to settle the balance. Any remaining funds are then passed on to your beneficiaries.
• Drawdown lifetime mortgage: This is similar to a standard lifetime mortgage and works in much the same way with one exception. Instead of providing a lump sum, it creates a drawdown facility, which you can call upon as and when you are in need of cash. This can be beneficial as you will only pay interest on the money already taken and it can be helpful for those who are worried about the impact a large lump sum may have on their eligibility for means tested state assistance.
• Enhanced lifetime mortgages: With these types of lifetime mortgage, calculators will factor in your current medical health. Those who are suffering from a medical condition which may impair their life expectancy are offered a higher percentage of equity release than those of the same age but in good health.
Making the Most of Your Lifetime Mortgage Calculators
• Check the type of calculator: In order to ensure that you have considered all your options, it is important to check you are using a calculator which offers different types of lifetime mortgage and equity release plans. There are a number of independent brokers who offer a free calculator and cover a full range of different equity release products. These types of calculator will often automatically verify that you meet the relevant criteria and provide details of plans which would be best suited to your needs.
• Use more than one calculator: These tools are very useful and offered for free with no commitment. It is important to take advantage of this convenience and ensure you use more than one calculator. Ideally, to gain a good perspective on the market, you should use at least three to five different calculators.
• Ensure your details are correct: The calculators use mathematical information and have no checks for accuracy. Therefore you must ensure that your details are correct. It is worth taking the time to obtain a new statement from your mortgage provider with an up to date balance, and use website tools to obtain a property value based on houses which have recently sold in your area.
If you are considering equity release, it is important to make the most of lifetime mortgage calculators. They can provide great information about the types of lifetime mortgage. Calculators can also supply the figures of plans which could suit your needs to enable you to make informed decisions. Although you will need to consult a professional adviser for your application, you can assure yourself of your decision to proceed further just with the information supplied by the calculator alone.
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