What is the Purpose of an Equity Release Calculator?

calculator and moneyThe biggest question you have with any mortgage product is — can you afford it? You may not be ready to talk with a mortgage expert yet, so how do you determine the affordability of the product? It is easy to find that there are only mortgage calculators including an equity release calculator for retirement mortgage products. The purpose of any calculator is to tell you mathematically whether you can afford something or not—that being said there are different types of lifetime mortgage and home reversion calculators. Before starting further research find out if you can truly afford one of the lifetime mortgages or home reversion packages available to you.

How Equity Release Calculators Work
An equity release calculator works in different ways depending on the type of equity release scheme you are interested in. It is important that you use the correct calculator for the type of product you are looking to get. If you have not decided between home reversion and lifetime mortgage that is okay. You can decide after you use the equity release calculator to determine the affordability of both options. To help explain this further, examine the different calculators, mortgage criteria and some examples.

Home Reversion Calculators
Home reversion is not a mortgage, but a form of equity release. This is an important distinction as it determines the outcome of the calculation you can perform with the home reversion calculator. Home reversion requires you to sell a portion, or your entire house in return for a place to live for the rest of your life and enough cash to live on. You are selling some or your entire home as a way to access the equity in your home.

The first step is determining how much of your home you want to sell: 0% to 100%. Obviously most home reversion companies have a specific minimum of what you can sell for example you may be able to sell 20% initially, whereas another company may require at least 50% of your home sold.

There are no interest rates with this. You also need to state if you are single or a couple, your age, and the value of your property. If your home is worth £150,000 you might be able to release up to £46,000. This would be a little more than 30% of the property value based on someone who is 65 years of age. There are also enhanced versions that would offer up to £75,000 or 50% of the home value should the youngest homeowner have a shorter life expectancy.

Lifetime Mortgage Calculators
Lifetime mortgages are equity release loans where you have the option of repayment of interest or not. The option to repay the interest or not are the two major differences between lifetime mortgages & home reversion plans. You also have different lifetime mortgage plans including roll-up, drawdown, interest only, and enhanced or ill-health. Depending on the type of lifetime mortgage the amount you can obtain in equity will different. As you learned in home reversion if there is a health issue you can access more equity. The same rule applies to lifetime mortgages; if you have health that lowers your life expectancy such as cancer issues you can unlock more equity via the enhanced lifetime mortgage schemes.

The calculator will need to know your sex or if you are a couple the age of youngest homeowner, and current property value. The calculation will then return a value based on your age, property value and current interest rates. You will be given a loan to value or LTV total that is based on a percentage of the home.

With lifetime mortgages you cannot take out 100% of the value of your home. Instead, the lending company determines the loan to value percentage they are willing to offer whether it is 11% to 52%. Most do not offer anything higher than 54% loan to value to avoid the no negative equity guarantee that is part of your loan. The interest accrual over the years you have left plus the initial sum taken cannot reach a value of more than 100% of the home value. To protect against depreciation lifetime mortgages provide a LTV percentage that is significantly lower than the home value based on your age.

A person 65 years of age with £200,000 value home and no health issues may be able to release up to 30% of the home value or £60,000. A person that is 85 could release 52% of their home value or £104,000. A person 65 with a health condition could release the same amount as the person age 85. Make certain you are using an appropriate equity release calculator based on your health issues, age, and the type of equity release to obtain a more accurate estimate.

What do the equity release calculator results tell us?
Depending on the type of equity release scheme you are looking towards, the relevant equity release calculator will advise the maximum release available. However, this isn’t the final chapter of the research episode. Once the maximum equity release lump sum has been established, the parameters of the borrowing facility are now known & will hopefully encompass the amount needed to meet the financial objectives planned.

The secret is not to automatically think this maximum equity release should be taken. It mustn’t unless absolutely necessary. The reason being, that any excess equity released if just left languishing in a bank account, will not be earning as much as being charged on the equity release scheme. This would therefore be bad advice. Therefore, consider a drawdown lifetime mortgage if the maximum equity release is not required.

But the two lessons learned would be the equity release calculator comes in two forms; lifetime mortgage calculator & home reversion calculator and that only the necessary amount that should be taken is the principle sum to meet the first year’s financial objectives. Equity release calculations therefore provide the starting point for one’s research into enhancing the retirement lifestyle’s for the over 55’s.

The Benefits of Not Using the Aviva Equity Release Eligibility Calculator

aviva calculatorCalculators are not created equal in the equity release market. Instead, many companies have their own calculators on their website, while there are independent websites for independent brokerage firms that offer independent calculators and other tools. The Aviva equity release eligibility calculator is dependent on Aviva’s website. It is not going to provide you with results on any product but the Aviva Lump Sum Max plan.

The Lump Sum Max Plan
This lifetime mortgage product is not sold through Aviva sales representatives. Instead, there is a brokerage firm that is dependent or symbiotic with Aviva. The agreement stipulates the firm cannot mention other products in the market. They are only allowed to provide more information regarding the Aviva Lump Sum Max plan. Not only is the plan the only thing they can mention, but it is not a competitive product, which Aviva does have just not on their website or through the brokerage firm they offer the lump sum deal with.

If you went to Equity Release Supermarket you could find other Aviva products that are more competitive. You would also be able to compare them with Just Retirement, Pure Retirement, More2Life and other equity release companies. By going to independent sites you would also be able to locate independent advice from qualified brokers able to speak about the different equity release products on the market.

There is definitely a benefit to not using the Aviva equity release eligibility calculator. As a person looking for financial products you should be armed with all the information about available products and not just one option. In this way you make a sound decision on what is best for you and later on your beneficiaries. You should be aware that your beneficiaries could suffer if the product is not competitive enough.

What Equity Release Calculators Tell You
Equity release calculators are designed to give you a few pieces of information, but mostly they tell you if the loan amount you are offered from the lifetime mortgage company is going to be the amount you want. Basically the calculator is designed to tell you the maximum amount of tax free cash you can get in a lump sum or other equity release product.

For example at age 65 Pure Retirement, Just Retirement, and Aviva all offer a maximum loan to value percentage of 30%, but if you go up to age 75 Aviva offers 41% while Pure Retirement offers 42%.

To make this clearer if you own a home that is £100k in value, meaning this is the equity you have in it and you are 65 you could receive £30,000 as the maximum cash amount from the three companies. If you are 75 with the same housing value you would get £41,000 from Aviva and £42,000 from Pure Retirement. Pure Retirement offers a deal in which you do not pay for the appraisal and if the amount is more than £45,000 you do not have to pay the application fee.

As you can see there are variations on what you can get from a company. One of the most important things to understand is how the loan to value percentage is reached. Obviously you know the factors: age and home value. What you may not understand is the reasoning behind the values stated here.

An equity release company is in the business of making money. They are investing in you. This is a future investment return for them because you have to sell the home or die for the loan to be paid in full plus any interest. This is what lifetime mortgage is all about.

The older you are the less time you have left on earth. This is how the lender looks at it. Someone 65 could life to 100, which is 35 years of an outstanding loan accruing interest. The house has to have enough value in it to cover the compounding interest without turning the situation into one of negative equity. Homes are also meant to appreciate, but depreciation can also happen. If the market plummets the company could be left without profit. Therefore, they make certain you have enough value in a home to cover the amount you want plus an age that ensures you will not live long enough to go beyond the worth of the home.

When you put all that together, you want an independent calculator and not the Aviva equity release eligibility calculator that only gives you data on one product.

Where an Equity Release Calculator UK Scores Highly

calculator pencil and notepadWhat if you start talking with a broker about potential equity release products for your retirement? What if after you go through the whole process with a credit check, credit score check, age analysis, home value appraisal, and health questionnaire only to be turned down? It would not make your day, right? In fact, you would be pretty upset over wasting so much time listening to a broker and how your situation would provide you a loan. Worse you may find that you cannot afford the loan the broker is willing to offer you after all that time spent. Rather than reach such frustration levels, you can use an equity release calculator UK to determine whether you can afford the loan right at the outset. This is where the ER calculator scores highly.

How the Process Works
Before you get involved in the calculator to obtain a figure, you should understand that equity release is for over 55s. It is not a product someone under 55 can obtain. If you have yet to reach 55 or are not in retirement, you can still use the equity release calculator to arrive at a retirement plan. You may have five years where you can make more money and remove the need for such a loan altogether. You may also find you can reduce what you need to borrow once you have a plan in place.

You will also need to understand the current value of your home. If you have an appraisal that is a few years old this is good. For many, their last appraisal was when they purchased the home. If you can find this value you can use Nationwide to determine your home’s approximate value. If you do not have the home value you can use Zoopla and Right Move to search for recent sales and current listings on the market. This gives an approximation only, so you can only use the equity release calculator UK as a guide.

Types of Calculators
Also, make certain you are using an appropriate calculator for the type of equity release product you want. If you want an interest only lifetime mortgage, you need to use an interest only lifetime mortgage calculator. This calculator accounts for the different loan to value criteria interest only products have, versus the standard lump sum tax free cash lifetime mortgage. Also, you have an impaired equity release calculator to help you with the enhanced lifetime mortgage, where the youngest homeowner has to have a serious illness as listed on Aviva’s website.

There are also home reversion calculators, which offer results for a partial or full sale of the home, versus a lifetime mortgage product.

Using an Independent Website
Going onto Aviva, Pure Retirement, More2Life or any other equity release mortgage company website will supply you with a calculator; however, it is going to be created for their products. The results will not be independent, so planning on the information will only help if you go with that company. You may find another company is willing to offer more or less in a maximum amount. This is why you want to use an independent website like equityreleasecouncil.com, equityreleasesupermarket.com, or many of the others that exist to use the calculator. These calculators are designed to compare results so they have the ability to look at more than one type of mortgage on the market at different interest rates and with different loan to value criteria.

Loan to Value Discussion
Each of the equity release products has a loan to value criteria that is used in the calculation. It is based on age. The older you are the more you can take out as a tax free lump sum. The premise is you are older and thus nearer to death than a younger individual. The loan will not be outstanding for as long and therefore the company can afford a larger lump sum payment. Of course, this is not always how life works. Some individuals live for 20 years longer than expected, while others make it only a few years. The point is that age factors into the sum.

If a person is 55 they might receive 19% loan to value, meaning the loan is 19 per cent of the value of the property. A person of 65 could receive 30%, so a home worth £100,000 would provide £30,000 in a loan. As you use the equity release calculator UK you should remember it is a guideline and you never have to take the maximum amount offered by a broker, instead take what is comfortable.

Adjusting Insurance to Suit Your Age

insurance documentAs you age, your body changes and so do your health requirements. In order to ensure that you continue to be able to afford effective medical treatment and the care that you might need, it is important that you keep your insurance and medical aid schemes up to date and tailored to your current needs. If you do find later that you have limited funding for your health needs and you own your home there is an option in the impaired life equity release plan.

Visit Your Insurance Agent
In order to ensure that your cover fits the state of your health, you will need to make sure that landmark periods, such as the time at which you decide to retire, are accompanied by visits to your insurance consultant. This kind of expert will be able to point you in the direction of the right policy for your needs.

This process may also require that you pay a visit to your doctor for a medical examination. This is a standard requirement for a variety of financial schemes, whether you are interested in insurance or in an impaired life equity release plan from the likes of Aviva. The doctor will either give you the results of your check up, or he or she will send them directly to your insurer.

From here, you will able to sign up for a policy which safeguards against the risks specific to you. You may find that your monthly premiums increase; this is in order to account for the potential of illness or injury.

Because medical treatment is so expensive, it is important that as you age, you keep your health insurance up to date. This will help to ensure that you always have access to the treatment you need.

Financial Products for Health Reasons
There may come a time when you need specialists that the NHS is not able to provide. You may need treatments that are not a part of NHS services too. Whatever the case may be that you have health insurance, life insurance, and health needs you may also need to look towards financial products that can help you.

Equity release for retirees are usually called lifetime mortgages and home reversion schemes. Home reversion is where you sell a portion of your home in return for tax free cash to use now. You do not owe anything at the end of your life or when you decide to sell the rest. Instead, you have money to live on at the end or you can leave it as an inheritance. No matter the case you obtain funds to live on and you get to remain in your house until you decide to leave, rent free. In fact you have a lifetime tenancy agreement. You simply need to be 65 years of age.

Lifetime mortgages are different in that you take out a loan. This loan has interest, but you still live in your home until death or a move to a retirement community. The house is then sold to repay the interest and loan. You can be as young as 55 to obtain one of these loan options.

Impaired life or enhanced lifetime mortgages apply to the health discussion the most. This type of lifetime mortgage is specific to an illness that may threaten the longevity of your life. You can use the funds to have a comfortable life, but you also get a larger lump sum than the regular lump sum mortgage. The premise is you will pay it back a lot sooner given your health issues.

It might seem cold to say it this way, but the simple truth is you have options that can help pay for things later in life.

Insurance versus Lifetime Mortgages
Obviously anything that is not covered under NHS is going to require insurance and an independent facility. It is a good idea to have health insurance for these purposes, but ask yourself- how will you pay for it? The answer can be lifetime mortgages. You can use the money from your equity release to pay for any monthly expenses like insurance. This would also keep those pesky health bills down. If you also pay for life insurance then you have a potential product besides the house that can pay off the equity release mortgage. There are many benefits to considering these products together. Even if you are not to retirement age yet, these concepts should be considered as a way to plan for your future. So whether it is the impaired life equity release plan or insurance you have potential help available.

Elderly Care is Not Always for the Long Term

nurse and old ladyThe elderly may learn that they need care for a number of different reasons. Some may need some help with just normal everyday activities while there are some that need some rather intensive care especially if they suffer from certain ailments. As age progresses, so does the likelihood that the elderly may develop a number of diseases and conditions, some of which are known as degenerative conditions. Those who suffer from degenerative conditions will most likely continue to get progressively worse. Because of that progression, most elderly individuals with degenerative conditions will continue to become more dependent. Of course, there are those elderly who simply suffer from other ailments. For them, intensive care may be needed to help recover from an illness or accident. For these individuals, their care may not be as long term as those who suffer from conditions that are not expected to improve.

Learning that an elderly family member needs care can be a quite stressful realization. In fact, most children of the elderly think that once their parents need care, if ever, they will be able to care for them themselves. However, this is not always the case. In fact, it is quite rare. It is not always possible to care for an ailing parent, especially given the life stressors that already exist including career and family life. That being said, it can be incredibly disappointing to know that you need to put your parent(s) in the care of someone else. Once that determination has been realized, you may need to shift your thinking into deciding exactly where your parent will receive their care. In all likelihood, you want your parent to receive the best care possible and in the best setting.

Not all of the care that the elderly receive has to be long term. Some care may simply warrant a short stay in the hospital. It could also be a short stay in a residential care home. Either way, once the individual returns home, there may be some additional supports or modifications that need to take place to ensure that the individual is able to stay comfortably in their home setting.

There are specialist firms providing care services in the patient’s own home. This could be the ideal solution to someone returning home following a stay in hospital. These firms are able to best accommodate the needs of the individual patient and can work with both the patient and their loved ones to help establish the supports needed to aid the patient in their recovery and to ensure that they receive the best care possible to promote a healthy and safe living environment. It is also possible to adjust and change the care plan as health improves. Once the patient is fully recovered, if that occurs, it is possible to simply end the care. So, this solution works perfectly for those who are recovering from an illness or accident and know that their needs may change as they continue to improve. There is a great deal of flexibility with this kind of treatment and it can be modified as needs change. This type of care can also be of benefit when it comes to couples as well, especially if one partner in the couple is the full time caregiver for the other. If they become ill, care can be brought in temporarily to provide respite which avoids the need for the dependent partner to leave their home and move into a care home. This care, again, only has to be in place while the other partner returns to full strength and can go back to their caregiver responsibilities. So, this kind of in-home care can be of great benefit for those who know that they do not need full time, long term care. Instead, this kind of schedule allows those who need short term care to get the care they need as they slowly get better.

One concern that many have about using this kind of short term care in their own home is how they would possibly be able to afford it. Equity release could be on option to consider as it allows you to stay in your own home while you are able to get the help you need at the same time. Equity release allows you to release the capital required to cover your care needs without the need for you to sell your home. Because there are many different equity release or enhanced lifetime mortgage schemes now available it is important that you seek specialist financial advice in this area.