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Equity Release How You Can Use an Equity Release Calculator

In the UK, most people are opting to turn their properties into cash machines. Instead of letting your property stay idle without giving you any returns, you can withdraw equity on it and make it your retirement fund.

Equity Release and How It Works

So basically equity release refers to the process of retaining use of your property while earning a stream of income from it. You can also choose to have one large lump sum payment on the property as opposed to instalments. Most equity release firms in the UK now treat these facilities as life time loans and this means that you do not need to pay the lender anything up until the time of your demise or until you choose to sell the property. During this entire time, interest is calculated.

Why You Would Need Equity Release

The following are some of the most common reasons why people take out equity release on their property:

To fund an earlier mortgage

To pay for emergencies and home improvement

As a source of funding for other projects e.g. buying a new home for children

Equity Release Calculator

This is a type of calculator that helps you understand how much you stand to get when you opt to withdraw the equity on your home. Some factors that determine how much money you will get from the equity release are your age and the value of the property you intend to use. Equity calculators are quite easy to use. Your solicitor or financial advisor on the matter will take you through several discussions when using the equity calculator. Some of these include eligibility confirmation and advice regarding how much you should take out.

Why Do You Need One?

Equity release is a type of mortgage on your property and like with all matters of financing the biggest question is- can you afford the venture? Most people will tell you to call a mortgage expert and have them do the evaluation for you. You may not be ready to do this just yet as such consultations do not come free. This is when the equity calculator comes in handy. Using simple mathematics it can help you know in a matter of minutes whether or not you can afford this type of financing opportunity.

How They Work

Equity release calculators work differently depending largely on the type of equity release product you want. Always ensure that the equity release calculator you are using is indeed the right one. This will guide your decision making so there is really no room for error.

Types of Equity Release Calculators

There are various types of equity release calculators and here are a few that you may find useful;

Home Reversion Calculator

This is a type of equity release on property you own. In this particular type of release you are required by the lending firm to sell part or the whole of your property in order to unlock the equity you have on it. Before using the calculator, you must decide how much of your home you are willing to part with. Firms operate differently and obviously there will always be a minimum percentage that you must work with. So for example if your home is $ 150000 in value, you might be able to get $ 46000 on it.

Lifetime Mortgage Calculator

Unlike the home reversion facility, the lifetime mortgage is a type of equity release where you have the option of either paying up the interests or not. Some of the parameters you will need to feed into the lifetime mortgage calculator include your sex, age, and marital status, age of youngest homeowner and value of the property at the time of the calculation. Unfortunately this type of loan does not allow 100% funding against your property. Most offers do not exceed 55% if at all. The interest that is expected to accrue over the years you have remaining in your life added to the amount you take out cannot get to or go beyond 100% value of your property.

Interpreting Equity Calculator Results

No matter which calculator you use it will give you the maximum amount that can be availed to you. This is however not enough to inform your borrowing parameters. It does not go without saying that this is the amount you must take out. Unless you absolutely need the maximum amount, seek advice about a drawdown mortgage instead. The rule of thumb with equity releases is this; always take the sum that you need to meet the objectives of the first financial year only. These calculators are therefore a great way to begin your research on taking out equity on your property. The buck does not stop with them though. 

 

 

 

 

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