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Equity Review | October 18, 2017

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How Many Results Can an Equity Release Calculator Show?

Kenneth Hardman
  • On August 14, 2014

You might be surprised at the number of results you can gain on an equity release calculator in 2014. Technology is improving, which means companies are improving their websites to benefit you the most. Many companies are beginning to offer you more information to build consumer trust, plus helping you get armed with proper information that will lead to the best equity release product on the market. The answer is that most equity release calculators can offer you up to four equity results. These results are standard, enhanced, interest only and home reversion equity release results. Not all websites will offer a home reversion calculator.

Home Reversion Calculators
The equity release market has changed. It will continue to change. Technology, new products, and economic changes ensure the industry will evolve to fit consumers’ needs. Ten years ago home reversion was the most sought after product for equity release, helping retirees find a comfortable retirement. Today, most of these products have left the market, leaving lifetime mortgages as the most popular products.

Some of this was due to misconceptions, which the FSA now the Financial Conduct Authority (FCA) is regulating to ensure proper equity release schemes. Another reason was a change in demand. Due to the popularity of home reversion becoming lessened, there are fewer websites willing to offer a home reversion calculator. Still, there is at least one website that can help you.

Besides the difficulty in finding results for home reversion, the way the calculator works is different. Home reversion is about selling the home in part or full. This means you are seeking a maximum tax free lump sum based on the percentage of home you are willing to sell, instead of the percentage a lender is willing to give you based on your age, home value and interest rate accrual. There is no interest rate. You can put your age and home value in the home reversion calculator; change the percentage of home you sell and see the different lump sums you might be awarded. It is an estimate, so make sure you use the value as a guide, even with lifetime mortgage calculators.

Lifetime Mortgage Calculators
There are four lifetime mortgages, but typically standard, enhanced and interest only calculator results are provided. The assumption is if you know the standard maximum tax free lump sum, then you understand the drawdown account will have a similar maximum, but that you draw on it rather than receiving it as a one-time lump sum payment.

For lump sum calculator results, you get the standard maximum based on your age and home value. The older you are and the more value in the home, the higher the loan to value percentage. Basically, it pays to be older and have more equity. The loan to value percentage is based on your life expectancy and accurate home value. If you are 65 you could get as much as 31% of your home value through certain home equity release companies.

Being Ill pays off
There are very few instances when being ill can be an actual advantage. If you are at an amusement park and have crutches or a wheelchair you often get to go in a different lane to get on the ride. For lifetime mortgages it means more money than the standard allowable amount for typical lump sum mortgages.

The premise behind all these products is age and how long the loan balance or home will remain in your ownership, versus the company providing an equity release. It stands to reason if you are ill with heart disease, diabetes, MS, or cancer that your life expectancy is lower than a healthy person.

It makes it easier for a company to invest when the money is potentially coming back early. The youngest homeowner has to be 55 and be the person who is ill. The home must have at least £60,000 in value. After a health and lifestyle questionnaire is filled out, a result of the maximum is shown. It is again an estimate and to be used as a guide only.

Interest Only Savings
An interest only loan by definition means you pay the interest off, so that it is not accruing, while the principle balance remains unpaid. The same is true of any equity release lifetime mortgage of that name. You make a monthly payment, so the result is slightly different than the standard and thus the need for a fourth result option from the equity release calculator.