Whenever you are considering making a financial decision about borrowing or investments, it is important to know about all your options and the limitations or restrictions which may apply. Many products are regulated for consumer protection, but you may wish to conduct your own research before committing to see a financial adviser or broker. For the over fifty-fives age group, there are limited options for borrowing or raising additional funds. However, the equity release market has a wide selection of plans and schemes which allow this age group to release the equity tied up in their property.
This can provide a tax free lump sum which can be used for purchases, supplementing a pension or even as inheritance planning. In order to assess whether equity release is a viable option for your circumstances you are going to need to calculate the maximum lump sum available and this can be done using an equity release calculator.
What Are Equity Release Calculators?
Equity release calculators are online tools which have been programmed to calculate the maximum lump sum available with equity release schemes. They have been on a variety of financial websites for quite a few years now, but they have been developed a great deal over the last few years to provide more accurate and detailed information, to help home owners with making the decision about whether they would like to apply for equity release. There are a number of equity release providers and comparison sites which feature this type of calculator and by using four or five different calculators, you can gain a good insight into the equity release marketplace and the types of deals which would be best suited to your specific circumstances.
How Do the Calculators Work?
The calculators are set up like a mini online survey. You enter personal and financial details and the calculator has been pre-programmed to take this information and apply it to a standard formula to calculate the maximum lump sum available to you. Some of the more in-depth calculators will even provide details and interest rates of schemes and plans which are applicable to your circumstances. The calculators will ask you a number of questions which will cover:
1. Your Age
This is because in order to calculate the maximum lump sum available, the calculator needs to estimate the duration of these schemes which run for the remainder of your lifespan. The general rule of thumb here is that older people will be offered a larger equity release sum.
2. The Value of Your Home
This figure, less any outstanding existing mortgage or loan secured on the property, will highlight the amount of equity available. There are strict loan to value ratios which providers adhere to, so even if you have available equity there may not be sufficient for an equity release scheme.
3. Your State of Health
Some companies offer enhancements to their equity release schemes for people who are deemed to have a reduced lifespan because of illness or medical conditions. Some calculators will factor the answer to health questions into their formula.
The calculators will also ensure that you meet the minimal criteria requirements for the particular equity release schemes. This can prevent people who would not qualify for equity release from wasting their time and energy researching these products. For example, while most people are aware that there is an age restriction of being a minimum of fifty-five, many people are unaware that on joint applications, both parties must be over fifty-five. The equity release companies will base their plan on the age of the younger of the two parties. Therefore if one spouse is fifty-seven but the other is fifty-four, equity release would not be possible for another year.
Important Considerations When Using a Calculator
Equity release calculators can be an excellent method to calculate the maximum lump sum available and determining if the option is viable for your circumstances. However, even the most sophisticated of calculators may not have access to exclusive deals which are only available through certain brokers or advisers. It is important to consult with a professional adviser for your equity release application, but be sure to take your calculator results and any scheme details to provide a basis for comparison. This will ensure that you can be assured of obtaining the best deal available to you.
Equity release can provide a great financial solution for a wide range of circumstances. Using a calculator to research the market and calculate the maximum lump sum available can be an excellent first step. It can ensure that you move forward aware of your options and confident in your decision.
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