Equity | What Is Equity Release

Two pieces of information are used for the equity release calculation, your age and the value of your home. It seems pretty straightforward and easy to enter correct data and receive an accurate result; however, there are actually a lot of factors that can hinder accuracy when using an equity release calculator on your own.

Age of the Youngest
An example of how someone can skew their results when using a calculator is the age you provide the calculator. The calculator does not have any idea how old each person in your home is. It has no way of knowing if the age you input is the one the equity release company is going to use.

• The youngest homeowner must be age 55 for lifetime mortgages and age 65 for home reversion plans.

A homeowner is defined by the property title. If the person is not in the property title and cannot sign for a loan, they do not qualify as part of the new loan; therefore, the youngest person on the property title is the person’s age you need to use in the calculator. Many consumers do not know this and may use their own age which could be older than the youngest person by a few years.

The calculator shows the results based on age and home value, thus if the age is not the one the equity release company will use, the results can show a larger maximum amount for the tax free lump sum than is actually going to be provided.

Valuing your Home
Did you hire an appraiser to tell you the value of your home? When you conduct online research for equity release schemes you probably are not ready to spend the money it takes for an appraisal. Plus there are equity release companies willing to offer free valuations. This means the number you use as the home value may be inaccurate in the current market.

Factors that apply include changes in the stability of the economy, particularly in the housing market where houses can start to appreciate. Recessions depreciate home values, which is why it turns into a select buyers’ market. A sellers’ market is where you have the upper hand because demand for your home drives the price up.

The more value in your home the more you can get released from equity. In your equity release calculation if you based the number of an appraisal you had when you bought the home 30 years ago the result will be skewed. You may find you could get double what your home was worth 30 years ago.

There are ways around this situation though. Nationwide offers an online tool that takes an old valuation, your home’s location, and will provide you with an estimate of its current value. Zoopla is also an option as you can find out about properties that have recently sold, pending sales, and homes on the market. By finding a comparable house in size and style in your area you can use their sale price as the home value.

But you are working off of an estimation, which means the results are an estimation: a guide and not to be used as a set in stone amount.

Brokers Narrow it Down
With equity release calculator results used as a guide, you will want to speak with an independent broker who is qualified and properly regulated. They can offer you the best products on the market for your situation by taking your information. You saved yourself some time in learning if it is possible to release some equity from your home. Now you need an experienced person to help you narrow down the best equity release for your needs.

They can do this by asking more pointed questions than the simple online equity release calculator. For example, if you have had ill health you may be asked to fill out a health and lifestyle questionnaire that would lead to a larger maximum amount available to you.

They may steer you more towards the drawdown mortgage if you have few expenses in the first 12 months of taking out the release in order to preserve funds for further into your retirement. It all starts with the equity release calculation and moves on from there. Armed with your guide as a cash sum number, you can decide if you want to take less, find a different product, or simply downsize to avoid lifetime mortgage products.

Aug

Is an Equity Release Calculator the Same as an Equity Calculator?

Categories: Equity Release

Tags: Equity, Equity Calculator, Equity Loans, Equity Release, Equity Release Calculator, Equity Release Products, Equity Release Schemes, Equity Release Schemes Calculator, Home Reversion, Interest Only Lifetime Mortgage, Interest Repayment, Lifetime mortgages, Long Term Care, Residential Mortgages, Secured Loans, Types of Loans

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There are numerous types of calculators available online to help you get answers to your questions including options for mortgages and equity release products. There are always going to be distinct differences when it comes to how these various calculators work, so you need to be clear on what they do and whether they are the same because the names are similar or not. In the case of an equity release calculator and equity calculator, you have two different types of calculators designed to give you two different answers, even when the names or keywords sound the same. In fact, you might run into a site that uses both phrases only to find out there is just one type of calculator available to you.

Unfortunately, some websites are misleading in order to get all consumers to visit, and most particularly those that can use their products. It is a long story but basically it goes back to the original concept of marketing for consumers with the new Internet. Now we are more refined and get into niches to ensure proper targeting. As long as you keep this in mind, you can search properly for exactly what you want.

Equity Release
An equity release calculator is specifically designed to target lifetime mortgages and home reversion. It is for individuals who are over 55. This is because the market for these equity releases is for those who are over 55 and heading into or already in retirement. These products provide money to supplement what used to be incoming from a job. It keeps you in the lifestyle you enjoy without making major changes.

Equity
An equity calculator is for residential mortgages, secured loans, and similar products designed more for individuals who are under the age of 55. As long as you have a steady income and can prove the income, you are able to get these types of loans. In recent years certain mortgages like interest only have not been offered above certain ages such as 65 because they are due to be paid at 75, when the person will be in retirement and may not have the funds to make the monthly repayments of interest. This is also different from the interest only lifetime mortgage which allows for interest repayment, but has the cap of a lifetime for the individual. Again, lifetime mortgages are for those aged 55 and over versus the interest only product that is not.

Understanding the Differences
Now that you know the calculators are for different age groups, it is possible to discuss the generic details of each in more context. An equity release schemes calculator is designed to use your age and the home value to tell you a maximum allowable lump sum. The older you are, the more money you can unlock from your home’s equity. This is on the assumption the money will be paid back sooner because you are closer to your death or needing long term care in a facility, versus living in the home. The more value in the home, the more you can obtain in a loan as well. Equity release works on the concept of loan to value percentage, where you get a certain per cent of the home based on the accrual of compounding interest over your expected lifetime.

With standard mortgages for the under 55s, mortgages are set on a fixed term. For interest only it is usually 10 years, where the principle balance must be paid in a balloon payment at the end of those 10 years. The interest is paid monthly. A 30 year fixed loan obviously has all payments in by the 30 year mark, although many refinance and thus extend the terms for another 30 years. The point is you are making payments throughout the mortgage as a means of dwindling the amount owed at the end.

With equity release you are not, so you pay interest in full plus the capital sum in full at the very end. It makes for one very large payment. The calculator for simple equity loans has to account for the length of term you will have the loan for such as 10, 15, 20, 25 or 30 years. It also accounts for the value of the property based on the amount you need to get the loan and pay for the property or to take equity out. You can usually release up to 85% although sometimes only 75%. Thus when you look for an equity release calculator you do not want an equity calculator to give you results and vice versa.

Oct

The Many Forms of Lifetime Mortgages

Categories: Equity Release, Lifetime Mortgage

Tags: Drawdown Lifetime Mortgage, Enhanced Lifetime Mortgage, Enhanced Lifetime Mortgage Plan, Equity, Equity Release, Equity Release Schemes, Financial Advisor, Fixed Repayment Lifetime Mortgage, Fixed Repayment Lifetime Mortgage Plan, Home Care, Interest Only, Interest Only Lifetime, Interest Only Lifetime Mortgage, Lifetime Mortgage, Lifetime Mortgage Plans, Lifetime Mortgage Scheme, Loans, Lump sum, Regular Income, Reserve Facility, Tax Free Lump Sum

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Lifetime mortgages are probably the most popular equity release schemes. These are loans that home owners take against their properties. The loans, or equities, are usually paid in tax free lump sums or regular income depending on one’s preference. The home owner need not pay anything. The loan amount, which includes the interest, is recovered by selling the property once the owner dies or moves into home care permanently. There are several forms of the lifetime mortgage plans that are open to people who are 55 years and above.

Enhanced lifetime mortgage plan is available to all seniors who suffer from life threatening conditions or lifestyles. In this scheme, one produces evidence of such ailments as heart condition, hypertension, cancer, or any other condition that can considerably shorten the life expectancy. The assumption that one will receive the equity release over a shorter period raises the lump sum payable to the ailing home owner.

Drawdown lifetime mortgage is another option. In this plan, one is entitled to a specific amount, depending on the value of the house and a few other factors, which can be paid in lump sum or as steady income. However, the home owner only pays interest on the amount he receives, and the rest is put in the reserve facility. The amount in reserve does not attract any interest.

In the interest only lifetime mortgage, the home owner chooses to pay back only the interest on a monthly basis. The plan allows the borrower to decide the percentage of the interest s/he wishes to pay. It also allows you to switch to another plan should you find the monthly payments financially demanding. The good thing about this plan is that the amount the home owner owes the lender does not increase with time since the interest is offset every month.

In a fixed repayment lifetime mortgage plan, the home owner receives an interest-free lump sum. However, one is required to pay to the lender a predetermined amount of money once the property is sold. In this plan, you can keep the property as long as you want, so long as you pay back the agreed amount once you sell it.

The type of lifetime mortgage scheme you choose should be tailored to fit your current financial situation and plans. It is, therefore, advisable to talk to a financial advisor to determine which plan suits you.

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