Tools, services, products, information: it all has two sides. The old adage “every story has two sides,” is true. It is why many people still use the saying. So as you search around for an equity release to help ease your retirement, consider the pros and cons that exist for the UK equity release calculator. This tool is going to be helpful in certain ways and not so much in others. Before examining these advantages and disadvantages, it is best to understand the difference between home reversion, lifetime mortgages, and lifetime mortgage products.
This is a form of equity release where you need to be at least 65 years of age to receive the product. It is based on a partial sale of your home. You can also sell your home in full. Regardless of how much home is sold, you will have a lifetime tenancy agreement allowing you to remain in the home until death or until you decide to move. The cash you receive is tax free and you can use it as you wish.
For those who do not want to give partial control of their home to another owner, there is the lifetime mortgage equity release scheme. Under this scheme you take out an actual loan. This loan compounds interest over the life of the loan and can be obtained at the age 55 or over. The interest adds to the back of the loan meaning it is not paid until the loan is paid. Since you live in the home until death or long term care is required, the loan is not paid until that time, thus the interest is not paid either.
Lifetime mortgages are enhanced, lump sum, drawdown, and interest only. An impaired equity release or enhanced option allows you to take more money out of your home due to illness. The assumption by the lender is that your life expectancy is much lower than the average person and therefore they will receive payment in full sooner. The youngest homeowner has to be the one with an illness. Next a lump sum is a standard option in which you receive one payment. Drawdown sets up an account you withdraw from while interest only accrues on the part you use. Interest only is the only product where you make a monthly payment of interest to keep the capital sum the same.
Calculating the Advantages
UK equity release calculator results can be very helpful as a guideline. The calculator can tell you the potential payout you can receive from the company based on your age and home value. There is a loan to value result in a percentage such as 30% of the home value can be given as a maximum amount to someone who is 65 years of age. You could have £30,000 in a loan if your home is worth £100K. This gives you an idea of whether you can afford the loan and whether you can obtain the amount of money you need in your retirement. Continuing to go through the equity release setup is not helpful if you do not qualify, cannot get enough, or cannot afford the loan, thus with a calculator you will have an idea of the potentials.
Disadvantages of Using the Tool
You see words like “potential” used in the advantages section because there is a disadvantage. It is an estimation of the possible amount you could be awarded by a company. Each company has their own calculation, interest rate, and qualifications. This means that the result a calculator provides may or may not be favourable to you and it is only an estimation of the potential.
Until you start the process with a broker, discuss terms, needs, and current products on the market, you will not know the exact amount you can obtain in an equity release. Always use the results a calculator provides you with as a guide towards the possibilities.
If you can keep it in mind as a guide there will be fewer surprises in the end. Unfortunately many individuals in the past have forgotten this important lesson when it comes to mortgages even equity releases for over 55s. They get excited over seeing the potential outcome and forget there are other criteria involved in the entire process. With different products on the market make sure you use the appropriate UK equity release calculator to get your estimated results before talking with a broker.