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Equity Review | November 22, 2019

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Find Out How Much You Can Borrow from Your Property

Find Out How Much You Can Borrow from Your Property
Kenneth Hardman

For many people considering equity release, the amount available to borrow from their property can be a barrier to proceeding forward. A great number of people wish to know that the equity release sum would be sufficient for their needs before wasting time arranging broker appointments and filling in applications. Fortunately, there are a number of equity release tools available including a free online property calculator which is readily available.

Why You Need a Property Calculator
Equity release is a little more complex than a conventional repayment mortgage. While you may be familiar with the formula to times your annual income and calculate your maximum loan, equity release requires no monthly repayments so your annual income is not relevant. However, the amount of equity in your property is paramount. This figure is obtained by taking the balance of any existing mortgage from the value of the property.

Most online equity release calculators will ask basic questions regarding your age, your gender and the property details. However, these calculators are purely mathematical algorithms and have no programming to assess the validity and accuracy of the information received. It is imperative that the information you supply is accurate. While personal details and even mortgage balances can be easy to obtain, the current value of your home can be a little more difficult to estimate. You may see similar properties being marketed for sale in your area, but you are not privy to how much they actually sold for.

With a property calculator, you can enter in basic details about your home including how many bedrooms, bathrooms and receptions rooms; whether you have a garage or driveway, conservatory or other additions. The calculator will then assess the property details in combination with your postal code to see what properties have sold in the area recently. This will provide you with quite an accurate assessment of the current value of your home.

Why the Exact Value is Important
Many people are confident that their home has sufficient equity to release the amount they require. However, there are strict rules associated with equity release. Due to the lifetime nature of the schemes, the amount of release is determined by the anticipated lifespan of the applicant. This means that people aged fifty-five will be qualified for a far smaller percentage of equity release than those aged eighty plus.

Therefore, it is important to ensure that the value of your property is as accurate as possible. Using a property calculator to obtain an accurate figure can give you confidence in the results of the equity release calculator and help you to make an informed decision about whether you would like to proceed forward or not. Despite a confidence that you have sufficient equity to release the sum required, your circumstances must meet a specific loan to value ratio in order to qualify.

This is because the interest on an equity release scheme is not repaid monthly. The interest accrues and is compounded on to the balance of the loan each year. This can mean that that balance increases significantly over the lifetime of the loan. The equity release company needs to be assured that the balance of the loan will never be higher than the value of the property. There are strict regulations in place, to ensure that no equity release participant ever leaves a property debt to their estate. You can expect to receive thirty to fifty per cent of the property value in equity release, depending on your circumstances including your age, gender and the amount of the outstanding balance on your existing mortgage. Under or over estimating the value of your property can have a dramatic impact on the amount of maximum release possible.

Consulting a Specialist Adviser
Even though the internet tools including property calculator and equity release calculator tools can be very accurate, it is important to understand that they should not replace the professional advice of a specialist adviser or broker. A specialist adviser will be able to assist you with assessing the benefits and limitations of specific schemes to ensure that it is the best possible solution for your requirements. Specialist advisers may also have access to schemes and products which are not readily available on even provider’s websites. Consultation with an independent specialist adviser dramatically increases the chances of obtaining the best possible deal. They will fully explain the restrictions and limitations so that you have all the information required to make an informed choice about applying. This will enable you to proceed with confidence, assured that equity release is the right choice for you.