28 February 2014
Equity Release
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Using Equity Release Calculators

Equity release schemes are a way for home owners over the age of fifty-five to borrow money against the current value of their home. Unlike conventional repayment mortgages, equity release requires no regular monthly payments, so there is no qualification criteria for your income. You are guaranteed the right to live in your home for the remainder of your lifetime and the loan is only paid back when you have passed away or in the event that you permanently move into a care facility. When first considering equity release, it can be a little daunting to study the sheer variety of products and schemes offered. However, equity release calculators are readily available to provide all the information you would require to make a decision about whether it is right for you.

What are Equity Release Calculators?

Equity release calculators are online tools which are confidential and free to use. They are pre-programmed to take the information you supply and apply it to a lending formula to determine whether you would be eligible and how much you could expect to receive with particular schemes. The equity release calculators will pose a number of questions about your personal information including your age and gender and your property. This is to ascertain the amount of equity contained in your property and the anticipated duration for the equity release loan. There are a number of different equity release lenders and each will have their own criteria to determine whether your circumstances are suitable for equity release.

For example, if your property is a leasehold flat, you may have certain restrictions imposed for your equity release when compared to a freehold house. One of the leading equity release companies, Aviva will only consider 75 per cent of the value for a leasehold flat. If your leasehold flat has a remaining lease of more than 75 years and is valued for £200,000, the Aviva calculations will be based on £150,000.

Some equity release calculators will also consider other factors such as your health status. There are a number of lenders who offer impaired life plans for those who have a history of poor health or a terminal condition. These tend to offer a greater percentage of equity release based on your expected lifespan being impaired by your medical condition.

Why are Equity Release Calculators Necessary?

Unlike conventional mortgages where there is a specific formula for your income multiplied to calculate the maximum loan possible, equity release criteria is different. Your property value is still important, but the products are designed to be a lifetime plan. Therefore the lender needs to anticipate the duration of the loan. The interest for the loan is compounded on to the balance annually and there are strict regulations which guarantee that equity release schemes will not cause an estate to inherit a debt from a property. This means that the lender will not simply lend against the full amount of equity in the home. They need to anticipate the interest being compounded over a number of years and ensure that there is sufficient equity in the property to cover this. In the event that there are excess funds available from the sale of the property after your death, the remaining funds will be distributed to your beneficiaries through your estate as normal.

Finding Good Equity Release Calculators

There are a great many equity release calculators available on websites for equity release providers and brokers. In order to obtain the best possible results, it is important to use multiple calculators. Ideally your chosen calculators should be from independent brokers, who have a wider access to products throughout the industry. Basic internet searches will reveal the websites with equity release calculators, but you should be wary of any calculator which insists on personal contact information. Using these may mean that you receive sales literature, calls and emails. Try to choose a calculator which offers more in-depth information including scheme details and interest rate illustrations. This will enable you to accurately compare the products which are best suited to your circumstances.

If you are interested in releasing equity from your home, equity release calculators can provide a good starting point. However, you must bear in mind that although these calculators can supply accurate information, they cannot replace the expertise of specialist advise. You should always consult with a specialist adviser or broker before making the decision to proceed with an application. Professional advice will provide the assurance that equity release is the best solution for your requirements and that you are proceeding with the scheme which is best suited to your needs.

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