Equity release is an increasingly popular means of accessing the money tied up in a property, with the Equity Release Council reporting a 40% increase in lending in 2017. These schemes are ideal for older people who may find themselves asset rich but cash poor due to ever increasing house prices, but with limited savings.
Equity release schemes enable the release of tax-free cash (equity) in either a lump sum or a series of withdrawals (what is known as drawdown). The way in which you spend the money is entirely up to you. As a result, equity release can significantly improve the living standards of homeowners aged 55 and over.
The money can be used to fund more comfortable lifestyles; top up monthly incomes; clear debt; make home improvements; assist family members to raise a deposit for their own homes; or provide early inheritance sums for loved ones. The choice is yours.
Why use an equity release calculator?
For many, the first step in discovering more about equity release is to use an online calculator. This will give you a rough idea of how much tax-free cash you could release. Afterall, once you feel that equity release could be a solution to your needs, then understanding and calculating whether sufficient equity would be available makes sense.
How much could I release?
The maximum amount available is often the first thing people look for when they start to look-into equity release. A calculator can give you an indication, but the actual maximum figure will depend upon several factors. Knowing the maximum release possible will enable you to then analyse how much of this lump sum you actually want.
Moreover, borrowing as much as you can may not be the right solution for you and must always talk to a specialist, expert adviser – such as the advisers at Equity Release Supermarket - before taking out a plan.
What determines how much I could release?
There are a number of factors and these include:
- The youngest homeowner’s age: the minimum age at which a lifetime mortgage (equity release) scheme can start is 55.
- Residency: you must be a UK resident.
- Location: the property must be located in the UK.
- The property’s valuation: the lowest acceptable valuation is £70,000.
- Any secured loan or mortgages outstanding: if you have any secured loan or mortgages outstanding, these will need to be deducted from the equity release calculation.
- The health of the homeowners: poor health can affect the scheme type and maximum lump sum amount available from equity release lenders. Having a health condition can actually increase the amount of money you can release.
- Minimum value: You must be planning to release at least £10,000.
- Single or joint life: whether the property is in one name or joint, can affect the lump sum amount available with certain lenders.
The types of equity release calculator and their results
Most equity release brokers and lenders offer a very simple calculator that will give you a rough idea of the amount you could release based upon your age, the value of your property and any outstanding mortgage you may have.
The better equity release calculators (such as Equity Release Supermarket’s) 3-in-1 calculator - could save you time in your search as it provides results across different types of plan: Standard, Enhanced and Interest-only.
- Standard: this result shows the maximum release from voluntary repayment or roll-up (where no repayments are made) lifetime mortgage plans.
- Enhanced: this result shows the maximum release where the homeowner has an existing medical condition and these schemes may offer a bigger lump sum. Your adviser will help you decide if this type of plan is right for you.
- Interest-Only: this result shows the maximum release for plans where regular monthly interest payments are made. The benefit of these schemes is that when the plan closes (when you die or go into long-term care) only the initial amount borrowed is repaid.
If you want to spend more time understanding how much you could release and the different types of plans available, then Equity Release Supermarket are the only broker to offer you a more sophisticated calculator, which allows you to compare all the deals that are currently available.
While a calculator is a simple way to understand how much you could borrow, it is no substitute for financial advice. You should always talk to an expert, impartial adviser – such as those at Equity Release Supermarket - who will search the whole market and find the right deal for you.