Are you ready to discover how much cash might be tied into your estate?
It could be a fortune, and you don’t even know it! Our FREE equity release calculator will help you discover the truth.
No documents are required. Simply enter a few personal details, including your email address, and we’ll send through your results shortly afterward.
Our goal is to assist you in discovering:
- The largest amount of equity that’s available in your home.
- How to successfully use your equity release plan.
- What you can expect from your equity release application.
- The minimum and maximum loan amount you can achieve.
- The factors that impact your calculation.
Are you wondering why we’re the perfect team to assist you on this journey?
Our team of leading experts has combed the market to bring you the most accurate and up-to-date equity release information to give you free advice. We’ve reviewed plans from all Equity Release Council members and analysed the data from Jan 2022.
With that in mind, you must be excited to discover how much cash you might be in line to unlock. Find out further information now!
What’s Equity Release?
Equity release is the term used for a group of financial services that allows homeowners aged 55 (the youngest applicant) or older to release funds tied into their estate while remaining a resident on the property for the rest of their life. The 2 main types of equity release are a lifetime mortgage and a home reversion scheme, both available to the UK homeowner.
How Does Equity Release Work?
Equity release works by the homeowners unlocking tax-free cash from their primary residence without having to pay back any of the loan or compound interest in their lifetime. Instead, the money is settled when the last homeowner (if the plan is joint) dies or moves to long-term care, usually through the sale of the property in question.
If you have property wealth but need retirement income, then a lifetime mortgage or home reversion might be right for you. Furthermore, the equity release interest rate you can achieve is the lowest things have ever been. Furthermore, you’re not obligated to make monthly payments. However, note that equity release mortgages can impact your qualification for means-tested benefits.1
Full article: How Does Equity Release Work?
Equity Release Types
Equity release plans are becoming the most popular way to release the property value tied up in your home. Whether you want a cash lump sum, a drawdown facility with an initial lump sum, or regular salary monthly payments, a lifetime mortgage or home reversion could work for you.
Through equity release providers, you can get all the perks of releasing equity, yet still, retain ownership of your property.
There are 2 equity release options available to you:
A Lifetime Mortgage
A Lifetime mortgage is a loan secured against your property (provided it’s your main residence) while retaining 100% ownership. By releasing equity with a lifetime mortgage, you’ll receive a percentage of your property value, you’ll be required to first pay off your existing mortgage with some of the money. With a lifetime mortgage, you can opt to make loan or interest monthly repayments, or have everything only repaid when you die or move to long-term care.
Perhaps interested in a lifetime mortgage? Discover the maximum amount you can receive with a lifetime mortgage here!
A Home Reversion Scheme
A home reversion is where you sell part or all of your home to a home reversion provider in return for a lump sum or regular payments. Unlike with a lifetime mortgage, you won’t own your home any longer. However, you’ll have the right to continue living in the property until you die, but you must to agree to maintain and insure it.
Considering a home reversion scheme? Be sure to get a top financial advisor to determine the best course of action.
Here’s more: What’s a Home Reversion Scheme?
Who Are the Equity Release Council?
The Equity Release Council2 (ERC) is a body that has been backed by the country’s major providers of equity release since its inception in 1991. It was established to advertise secure equity release solutions and defend homeowners’ rights. The Equity Release Council standards will make plans safer for UK retirees who have used equity release products.
Learn more: What is the Equity Release Council?
What are the Equity Release Criteria?
Equity release criteria include that the youngest homeowner must be 55 or older, your home must be in the UK, and it should be valued at £70,000 or more. Finally, the property must be your primary residence and only have a small or no mortgage remaining.
Take note: Through getting equity release advice, you can determine if these products are appropriate for you and your family.
Why You Should Use Our Free Equity Release Calculator
- An equity release calculator is the first step in your journey towards a financially free retirement. It’s a simple process and easy to use. It takes just 8 seconds to complete.
- We’ll send you an email with your equity release calculator results. The process is that simple.
- You’ll know how much you can release by using an equity release calculator.
How Do You Calculate Equity Release?
To calculate equity release, the youngest homeowner’s age, the property value, and the condition of your health are considered.
The maximum equity you can unlock will fluctuate with age. When you’re 55, you’ll have the option of up to 29.5% of the final determined value of your property. As the years go by, this amount caps at 59.28%. Therefore, age is one of the main factors considered when using an equity release calculator.
Equity Release Calculator Results Explained
Take Note: While our equity release calculator’s results are based on factual information, the condition of your property and other factors may be considered in the lender’s final decision. Your lender will send a valuator who’ll determine the accurate price of your estate.
Additionally, the interest rate you receive will be based on the amount of equity you choose to unlock.
What Can Affect Your Maximum Percentage?
Your maximum percentage can be affected by your health, lender fees, cashback offer, if you’re opting for a joint or single plan, your property location and construction type, your plan features, and if you have lodgers in your home.
Here’s more information:
Medically Underwritten Equity Release Plans
Did you know that suffering from a medical condition could positively impact the LTV that you could qualify to receive?
While illness can be challenging, you can use your enhanced equity release scheme to unlock additional funds to spend on comforts that make these challenges easier. In addition, all you’ll need to do is fill out a form, as no additional medical examinations are required.
With most equity release plans, you’ll be responsible for covering a lender fee. This fee is generally only due when the loan is settled, but your equity release lender should tell you all these terms and conditions.
Pro Tip: To obtain the maximum amount of equity, you should see if you can arrange to add these fees to the total loan amount.
Equity Release Plans That Offer Cashback
Some equity release plans have a cashback feature that gives you extra income with no interest attached. You can use this cash in any way you wish. While this amount is often based on the total equity you release and can be around 2% to 5%, in some cases, the cashback total is a fixed amount.
Joint vs. Single Equity Release
As previously mentioned, the age of the youngest homeowner determines the percentage of equity you can release. However, some lenders might give you a special deal for taking out a joint equity release plan. If you’re married and share your home, you might be obligated to unlock equity as a couple, but this could differ from one lender to the next.
The type of construction used for your property could impact the cash available for you to release. The reason behind this is that your lender needs to ensure that their investment is secure. The loan is taken out against the value of your property, and generally paid off when you die or move into long-term care.
If you live on the mainland and your home meets the necessary requirements, then you should qualify for equity release. Residents of Scotland have fewer plan options, and only 2 lenders have plans available in Northern Ireland. This could impact the deals you could be offered. In addition, other islands that are off the mainland will also have limited plan options.
With equity release mortgages more popular than ever, lenders now offer plans with fantastic features. Look out for deals that often pop up on the market.
These may include no early repayment charges, competitively low interest rates & a free professional home valuation. However, don’t be caught by flashy offers. Always look at your plan holistically to determine the best course of action for you and your family.
Lodgers in Your Home
If your children, family, or friends live with you, some equity release lenders might not offer you a plan or they might propose inflated interest rates. This might not be an issue in all cases, so we recommend you discuss this with your financial adviser.
Calculating Your Remaining Equity
In order to calculate the remaining equity on a loan, you will need 2 numbers. The first number can be found in your monthly mortgage statement and is called “balance”. This balance is what you owe on your total loan amount.
The second calculation needed for this type of calculator requires that we know how much interest was paid during those months as well as the principal payment covered each month.
Calculating How Much Money You’ll Get After Switching Equity Release Plans
As with other financial products, there are a few costs that go with switching an equity release plan. So, you’ll need to weigh your options before switching from one plan to another. Consider the following points:
- Look at the early repayment charges3 (or ERC). In the past, older mortgage plans had big ERCs because they weren’t made with early repayments in view. Your financial adviser will need to check these out for you. It might not be in your best interest to switch plans now.
- You should look at all the costs involved with switching from one plan to another. Applying for a new equity release plan will have other potential charges. The extra costs will depend on the loan that you want to change to. According to most financial advisers, these costs are roughly £2,000 maximum.
- Look at the interest rates. If you change your lifetime mortgage, you’ll continue paying daily interest on your initial mortgage throughout your application process. Your financial adviser can help calculate 60 days interest when you want to determine the exact amount needed on the application.
How Do You Calculate Equity Release?
Simply multiply the LTV (loan-to-value ratio) by your property’s value. The amount you seen is the maximum you can release from your property.
How Much Equity Do I Qualify For?
The maximum amount you can borrow is up to 55% of the value of your property, depending on your priority. To determine the exact amount, it’s advised to use an ER calculator. Another calculation that might give you a rough idea is this:
Current appraised value ($500,000) – Mortgage balance ($240,000) = Home equity ($260,000)
How Is Interest Calculated on Equity Release?
The plan has an interest rate calculated on a fixed rate of compound interest. Interest is calculated each day but added to the loan amount monthly or yearly.
What is the typical interest rate on equity release?
As a general rule an equity release interest rate below 3% is outstanding, 3% excellent, 4% good, 5% being average, and 6% plus being for more substantial borrowing with the most product features.
How is equity release interest calculated?
For most equity release plans, interest will be accrued daily and added to the mortgage monthly. On this basis, many lenders express their interest rates as a Monthly Equivalent Rate (or MER for short).
Equity release could be the secret to unlocking your retirement dreams. It’s a great way to stay in your home, maintain your lifestyle, or purchase some luxuries that you’ve always dreamed of. However, it is a major decision and one that should be carefully considered.
Now that you know how much equity you might be eligible to unlock, you should contact your independent financial adviser to discuss all your retirement options and equity release alternatives.
In addition, it would be wise to educate yourself on the pros and cons, before making any final plans.