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Equity Review | December 16, 2017

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Is There an Equity Release Calculator for People with Ill-health?

Is There an Equity Release Calculator for People with Ill-health?
Kenneth Hardman

Given the different products available in the equity release market, many independent websites have devised an equity release calculator capable of offering more than one result. It is possible to find results based on ill-health. These calculators are known as ill health, enhanced or impaired equity release calculators. They will differ in the maximum amount of cash a person can receive in a lifetime mortgage.

The Difference between Ill Health and Standard
Lifetime mortgages are provided based on two factors: age and property value. Property value is something the housing market determines based on supply and demand. Several factors like upkeep of the home, size, number of bathrooms and bedrooms also apply; however, it is the appraisal of a mortgage company which ultimately determines the property value a home can be sold for in the current market.

Age is something that applies to lifetime mortgages and not always to standard mortgages. This is due to the premise behind such equity release products. It is the assumption of a lifetime mortgage company that people of a certain age have a certain life expectancy age. Someone who is younger has longer to live, while someone older will have less. Based on this consideration, a lifetime mortgage maximum amount is lower at the younger age and higher at the older age. It means someone who is older can take out more funds since those funds and any compounding interest will be repaid earlier than it would if that person were younger.

With a person who has ill health the assumption has to change. Now there are health factors that could end a person’s life earlier than a healthy adult who is older. Cancer, diabetes, smoking related issues, heart disease and other illness could potentially affect the life expectancy of a person. The end result is the money can be returned quicker than a healthy person of the same age; therefore, the maximum amount lent to the homeowner can be more than a standard lifetime mortgage.

Loan to Value Percentages for Ill Health
Based on the difference health can play in the maximum amount, there are different loan to value percentages for ill health equity releases versus standard equity releases. The equity release calculator will provide the necessary calculation to determine the maximum lump sum amount provided for ill health. This is based on the table of age versus percentage of property value.

A healthy person at 65 can receive up to 30% of their home value, while a healthy person at age 90 can receive 52% of the home value in a loan. Someone who has ill health could be offered more than 30% for their home value even at the age of 65.

There is no table to show these numbers as it is based on the person’s actual health. An independent broker will be asked to examine a health and lifestyle questionnaire to determine how many health issues exist and whether there needs to be an increase to the maximum amount provided.

Why use a Calculator for an Estimate
Whenever you get a value from an impaired equity release calculator it should be considered as an estimate of potential equity release funds, but not a wholly accurate number. The calculator is designed to tell you if it is possible to get what you need out of an equity release scheme. However, it cannot provide the exact result.

One reason was already mentioned with regard to ill health. Ill health calculators may not ask all the questions that will determine your ability to release equity. A broker can therefore work to find a higher lump sum.

Even the standard equity release calculator is unable to provide a solid number. It is also a guideline for what is potentially available. For example you may feel you are in good health, need a higher maximum than the standard, and find an existing condition could provide you with that higher amount.

The calculator simply works to provide you with a potential number. Most often the exact result is a few hundred pounds off of the actual maximum, so it is close enough to determine if equity release is right for you.

After you use an equity release calculator, you will want to speak with an independent adviser. This adviser will be someone who is not tied to a specific company thus they can provide you with more information regarding available equity releases versus an adviser who is a part of a company and can only sell their company’s product.