Which Websites include an Interest Only Lifetime Mortgage Calculator?
Lifetime mortgages come in four types: lump sum, drawdown, enhanced, and interest only. The first three options can use the same calculator because they are all similar in one thing- they compound interest onto the back of the loan until the loan is paid off. A lifetime mortgage is not paid until the homeowner dies or moves to long term care. At this time the full capital sum is to be paid along with any compounded interest. While these products work in different ways, which sets them apart from each other the calculator can handle it. There is a specific interest online lifetime mortgage calculator available for interest only lifetime mortgages.
Explaining the Loans in Detail
A lump sum mortgage is the most simple in terms of explanation. It offers one lump sum payment of tax-free cash to the retiree. A person has to be at least 55 years of age and have a home value of at least £60,000. Someone 65 years of age will receive 31% of their home value in a lifetime mortgage. A home worth £100,000 will mean £31,000 in a lump sum as a maximum amount.
For a drawdown mortgage the maximum amount may remain unchanged, but how it is accessed is changed. An account is set up in which the home owner can withdraw from the account as they need the cash. Only the funds withdrawn from the account are going to incur interest. With an enhanced lifetime mortgage you could look for an enhanced lifetime mortgage calculator, but most websites will provide this together with a regular lifetime mortgage calculator. The enhanced loan offers a larger lump sum than standard equity releases on the assumption a person’s illness will lower their life expectancy.
The main concern of the lender is how long their money will be outstanding and accruing interest. A shorter amount of time the loan is unpaid the more they are willing to provide.
Interest only lifetime mortgages by name define the product. You will pay interest only on the loan. Even though you are a retiree of at least 55 years of age, when you take out this loan you pay interest. It was set up as a way to keep the principle balance from changing. There is less to worry about at the end of the loan.
Calculating Interest Only
Since a calculator needs to account for the interest you will pay on the loan it is going to be different from other calculators. The main difference is the loan to value criteria, which is typically lower than standard calculators for lifetime mortgages. They also will be unable to factor enhanced lifetime mortgage schemes because there is no ill health lifetime mortgage.
Finding the Tool to Help
Like finding a standard calculator for equity release, you have several websites offering this tool. Companies offering interest only lifetime mortgages will often have a calculator. The drawback to using a broker site is the calculator is not independent of their products. They use their criteria and interest rates, which may not translate to a different product on the market.
You are far better off looking for a website such as InterestOnlyLifetimeMortgage.com, CompareEquityRelease.com, EquityReleaseCalculator.net, LondonEquityRelease.com or EquityReleases.com. These are independent websites with comparison tools including their interest only lifetime mortgage calculator. This allows you to find more than one product, compare, and see what your potential maximum amount will be for the loan.
The maximum amount is something many consumers want to know. They may not take it and in fact it is wiser not to take the entire amount a broker is willing to give you. By taking more there is less inheritance left and a potential downfall with housing prices. Housing prices can depreciate as the last two recessions have proven. Rather than get into a tight situation it is better to take what you will need during your retirement period. It also lowers the interest payment.
Remember with interest you are looking at the total due with a calculation based on an annual percentage rate of that amount. Since the principle balance remains unpaid, you have to account for the interest payment you need to make each month with disposable income. An interest only lifetime calculator can give you a good idea of what you might expect to receive in a maximum amount plus the interest you would pay monthly. It is just a guideline though.