Your retirement is dependent on the amount of cash you have saved up. If you want to continue living in the lifestyle you are used to and still have enough funds to last until your death, you have to determine if you have enough saved. Unfortunately, most retirees today are living for longer and do not have enough saved. They are actually cash poor but property rich. It means they have access to funds, but it is tied into their home. If you are like this then it is natural to ask how much equity do you have in your home that could be turned into cash? For the answer to this you need an equity release calculator.
Starting with a Calculation
Talking with an industry expert can be helpful in determining the amount you can get in an equity release, but before you take the time to speak with an agent it is better to know if this financial product can help you.
An adviser can take a lot of your time researching products and come up with an answer that does not suit you and your current needs. They work their best to get you a product, but they may not be able to get you the funds you desire. After all that time spent with their research you might well be disappointed.
Rather than finding this is the case, you can use an equity release calculator on your own. This calculation can give you an estimate of maximum lump sum equity release. From this you can decide if you still want to speak with an independent adviser and get the best or highest maximum they can possibly get you or if you need to consider other options.
What the Calculation can Provide
The point behind any equity release calculator is to supply you with enough information to make a decision to speak with an independent adviser. The calculator will therefore provide a maximum lump sum, enhanced, or interest only calculation with regards to lifetime mortgages. There are other calculators, home reversion calculators, providing results for a non-mortgage product that also releases equity.
In the end the calculation will provide a maximum amount of funds you can get. It is always based on age and home property value. The maximum amount will be dependent on these two values and the type of equity release you are interested in.
How Age Applies
Age is the value an equity release company uses to determine your life expectancy and thus the amount of time the lifetime mortgage product will remain unpaid. With lifetime mortgages you do not repay the loan until death or until you move. You can move out of the home and into a new one or into long term care. Once the home is no longer your main residence, you must repay the loan and any compounding interest. The interest is determined by the company offering the product. It can vary from company to company; therefore, you may find an average value used which can later change your maximum cash amount a broker finds for you.
The younger you are the less you can receive in a mortgage as it will take more time for you to pay it back than an older individual. The youngest homeowner’s age is the one used by the equity release company.
Property Value and Equity Products
The money has to come from somewhere and as you are using your home as collateral for the lifetime mortgage, it makes sense part of the calculation is based on the property value of your home. It also makes perfect sense for the more value you have to be seen in a higher maximum amount. The less the home is worth the less you receive as a maximum amount.
LTV or ‘loan to value’ percentage takes the age into account and gives you a percentage of the home value provided in a loan. For example, a person 65 years of age could release 30% of their property value. If the home is worth £200,000 then the homeowner can unlock £60,000. The interest will then accrue on the capital sum until the entire amount is paid back.
As you can see there is plenty to learn from an equity release calculator. How you use this information is up to you, but at least you are aware of whether you can afford the lifetime mortgage or if you need to consider other alternatives. You also understand whether an independent broker can help you.