An Equity Release Mortgage Calculator is where your Research Should Start
Do you start in the middle of a maths problem in order to solve it? When you have a maths problem you have to start with a beginning. You need a couple of values that will be used to determine the answer, right? This is how you should look at the equity release mortgage calculator and equity release industry. If you want to find out if equity release is a viable option for your retirement income, you need to start out with some values that will be a basis for your research.
The Port of Call
Like a ship taking passengers on a cruise, there is a port of call that begins the journey in which you have other ports you stop at before heading back home or to your final destination. Think of the equity release calculator as the port of call for the equity release research you are about to conduct.
The estimate the calculator provides will determine if you can go out of port and continue on your journey or if you will need to stop and rethink your current path. You might have to take a different pathway on your journey to funding your retirement. It is all about the possibility of tax free cash in a lump sum which may or may not be enough to supplement your retirement income.
Figuring Your Path
Two equity release forms exist in the market: home reversion and lifetime mortgage. Home reversion is a sale of your home. It can be a full or partial sale. The amount you sell is entirely up to you. For the maximum amount of equity to be released from your home with home reversion, you need to sell the entire home. Using an equity release mortgage calculator you can determine whether you want to sell the entire home or if you can get enough with just a partial sale.
A lifetime mortgage works differently. It is a loan and it will have compounding interest. The difference from a mainstream loan is the repayment situation. You do not repay the loan or interest until death or a move from the home (e.g. into long term care). Once the home is no longer your main residence the loan is due in full. Often a sale is the only way for the repayment to occur.
The equity release calculator is going to supply you with a maximum lump sum value based on the standard lifetime mortgage product, at least with most sites. This value is based on your age and your property value. In fact, home reversion uses age and property value, too, as a way to decide the loan to value percentage.
Loan to Value Discussion
Loan to value means the value of your home versus the loan you receive. It is a percentage of value where you do not get 100% total market value for the home. Instead you might get 30% of the value, versus 50% of the value, depending on your age.
The profit an equity release company makes is based on the difference of total market value and what you will owe or receive in an equity release. The age used is always that of the youngest homeowner. For lifetime mortgages the youngest homeowner must be 55 years of age at least. Home reversion starts at the age of 65.
Gaining Advice is the Next Port
After you have found a value for the loan or home reversion, you have a guide. This number the calculator gave you is an estimate of possibilities, but only a qualified expert in equity release will be able to give you an exact quote of the funds available to you.
It is due to the different products and companies offering equity release. As you have at least five products and a dozen equity release providers, you could find one company is more competitive with their interest rates, allowing you to get the funds you need for a lower rate.
Until you actually speak with an equity release adviser it is difficult to say with accuracy the amount of tax free cash you will actually receive. Your independent adviser may be able to get you a larger sum because of an illness you have. They may have to reduce that amount because you do not qualify for the product you were quoted on. These are just some of the reasons to use the equity release mortgage calculator as the beginning for your journey towards a financially sound retirement.
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