Use the UK’s Best Lifetime Mortgage Calculator & Save

Use the UK’s Best Lifetime Mortgage Calculator & Save

Have you been wondering which equity release plan to choose? We’re here to help you decide. Take a look at the lifetime mortgage calculator and find out if it’s the right option for you.

An Overview Of Lifetime Mortgages

The whole world is grappling with an economic recession at the moment, and you might greatly benefit from extra cash during your retirement. Whether that means having a fantastic holiday you’ve been dreaming about your whole life, some well-deserved home renovations, or opening up your own business after twenty as an employer under harsh bosses, getting some extra cash in retirement is much-needed.

The Financial Conduct Authority (FCA1) is such a wonderful establishment helping many people out with their famous lifetime mortgages. This mortgage plan enables homeowners who are older than 55 to borrow money against the value of their property while they still have 100% ownership of the property and reside in it.

Now:

If this equity release mortgage plan is something you’re interested in, you need to calculate how much money you can get out of the lifetime mortgage. Let’s look at lifetime mortgages before we look at the lifetime mortgage calculator.

Expanding on Lifetime Mortgages

Expanding on Lifetime Mortgages

As mentioned before, a lifetime mortgage is a residential loan for homeowners aged 55 years or older. They enable you to release equity that’s tied up in your property. You don’t have to repay it as with other traditional mortgages.

With lifetime mortgages, you only need to repay the mortgage when the owner dies or moves into a long-term healthcare facility (mostly in retirement homes). When the owner passes on, equity release providers sell the house and take their share of the loan as well as any accrued interests. The remainder of the profit goes to your heirs.

Let me tell you something:

It’s very important to remember: most mortgage providers give 12 months for the repayment process to be done after the death of the homeowner.

But what interests are there?

Well, lifetime mortgage providers ask you to pay interest on the amount of money you borrowed. The interest rate gets added on a monthly basis to the total amount you’ll need to repay at the end of your loan. Meaning, any interest they charge will compound.

What does this mean for you?

If you don’t repay throughout your loan (the voluntary repayment plan or interest-only mortgages, for example), then your total loan will increase until the end of your mortgage. Your heirs might inherit less if that’s the case.

The Equity Release Council2 protects you and your estate when you take out a lifetime mortgage. They have a rule called the ‘no negative equity guarantee. This guarantee policy makes sure your heirs, or even you won’t have to repay more than your property’s original value.  The protection starts working if the loan becomes more than what your property’s worth.

So, if you need some extra cash to help you fund someone’s college fees or something else, this is an excellent option for you. However, one needs to ask how you calculate the amount of money you’ll get from a lifetime mortgage plan? Well, here’s everything you need to know about the lifetime mortgage calculator.

Lifetime Mortgage Calculator

The Lifetime Mortgage Calculator

The equity release lifetime mortgage calculator will ask you to input:

  • The value of your property – the law requires that the property’s minimum value is £70,000. Meaning, a higher property value will have a higher lifetime mortgage result after the calculation.
  • The age of the mortgage applicant – the homeowner needs to be a minimum of 55 years old. However, if you’re applying for the loan as a couple, the amount of money you can borrow will be determined based on the youngest of the two.
  • Your postcode – according to the rules of the ERC, you need to live within UK borders.

These points are the prerequisites equity release providers will use when calculating the total amount you can get with your lifetime mortgage. Sometimes, lifetime mortgage providers also want to know your gender and marital status.

Let me tell you something:

It’s important to know that these lifetime mortgage calculators don’t merely calculate the amount you can loan with your lifetime mortgage. It also calculates the amount of money you’ll receive with an impaired lifetime mortgage (if you have any health conditions that are shortening your lifespan) and an interest-only mortgage (where you repay interest every month).

Please don’t be alarmed! Don’t disturb your peace by trying to think where you’ll get the money to pay for your mortgage or help your kid through college. Luckily, the lifetime mortgage plan is tax-free!

So, your next question might be:

Is It Worth It

Is It Worth It?

A lifetime mortgage can be an excellent way to help you increase your lifestyle or to do everything you’ve ever dreamed of doing. So, if you take out a tax-free lump sum mortgage, you can be able to pay for your home renovations, your kids’ college fees, or simply keep up with your fantastic quality lifestyle during retirement.

Let’s consider this…

How much can you borrow? It all depends on these factors:

  • your age
  • your property type
  • your property’s value

All you need to do is put the information mentioned earlier into the lifetime mortgage calculator to calculate how much money you could access.

The Ins and Outs

Equity release is an ideal option for anyone looking to enhance their lifestyle after retirement, and here are some of the ins and outs.

1. It Offers You Financial Freedom

By taking out plans, you can use to spend your money as you want. Whether you need to upgrade that kitchen, make home changes like adding new double glazing, loft & cavity wall insulation, a world tour, or to help your kids buy their first home, it’s all up to you.

What you receive is tax-free, and you can opt to take it as either a lump sum, as an income, or in several smaller chunks (‘drawdown’) – thus giving you more flexibility.

2. It Does Not Require You to Downsize

You do not get to experience the hassle, inconvenience, and expense of moving out of your treasured family home. It provides you with the financial freedom you need but also the freedom of choice.

3. It Provides the ‘No Negative Guarantee’

It means that it protects you from debt due to being driven up by house price changes. Therefore, your beneficiaries cannot ever incur any debt over & above the market value once the mortgage holders die or are placed into permanent care.

What are the Negatives To Equity Release

Seems Too Good To Be True: What are the Negatives To Equity Release?

We’ve put together a list of pitfalls for your peace of mind.

1. ‘Rolled Up’ Interest

The most common scheme offers you money according to your property’s value when it comes to lifetime mortgages. These are usually at a fixed rate of interest.

Listen to this:

Lifetime mortgages are more popular than home reversion interest. Why? Because they don’t require you to pay interest monthly when you’re repaying your loan. The interest is ‘rolled up, and it’s payable as a large compounded amount at the end of your lifetime mortgage.

You can choose to keep the level of interest at a low by withdrawing equity (drawdown) or going with a once-off capital mortgage (lump-sum). A combination of both is also possible. Depending on your provider, of course, make sure that they tell you exactly how your option works, and its potential regarding interest. Make sure you get all the advice you need from them.

2. A Reduced Inheritance

When you take out equity from your home, it reduces the merit of your estate. This means you get a decreased inheritance for your heirs.

That being said, you don’t have to worry. There is a way to secure your inheritance, and it’s called ‘inheritance protection.’

Aviva and More2life, among other equity release providers in the UK, offer many safety features. When you choose the amount of your estate you want to secure; the pitfalls of some equity release plans allow you to get a quota of the property worth to continue being sold.

Now:

If you want to have a more significant percentage secured, you’ll most likely get a lowered maximum loan amount if that sounds like something you’d consider, feel free to ask an adviser for some financial advice.

3. Release Limits

In 2018, homes started to be appraised more, almost 20% more, depending on the circumstances. As population levels grow and the economy inflates, this is happening more and more.

If you have a large amount of equity release cash on your property, it might be that you won’t be able to release that much. Instead, you’ll have access to considerably less in the end.

Most equity release plan providers wait more than ten years to be repaid. Due to this reason, there are significant “discounts”. And another pitfall is that if you’re young and healthy, you’ll be eligible for less equity.

4. You Don’t Benefit From Increasing Property Market Values

Home reversion plans work in the way of people selling a portion of your home or their entire property to an equity release provider or lender. After selling a part of their home or their entire property, people receive a cash lump sum, and they can remain in their home at the same time. It’s also shared ownership of a home. The equity that’s released from the property could be something to think about, especially when it comes to negative equity.

And another thing:

Your provider will get a portion of the money from your property when they sell it. Meaning, you and your loved ones won’t benefit from the full money from the house. Therefore, it’s best to get advice from an expert so that you get the right information.

5. Early Repayment Charges You Should Know About

As their name states, Lifetime mortgages don’t have to be paid during your lifetime and while you’re the owner of the mortgaged house. You should also be prepared because you could run into a large sum of debt very quickly.

Consequently, they can have fast repayment charges if you’re repaying them before you pass away. This can put you in debt. So it all depends on your income. Look very closely before you take out this loan, you don’t want to make a mistake and end up with a load of debt.

But let me tell you something.

The new plans mostly have fixed-term advance arrangement payments as an option. It means that you can decide to close it or change it a few years into the plan.

6. Benefits Are Affected

By releasing the equity from your property, you increase your income or your savings. However, this might, in turn, have adverse effects on your means-tested benefit claims. You must do your research to find out exactly how they’ll be affected so that you don’t get a nasty surprise.

7. Extra Fees to Pay

If you require extra capital to help your finances once you retire, equity release is quite an adequate remedy. But, you need to find out what other options you have that don’t require extra fees. Other options don’t include interest charges, for example, that might suit your needs better.

You can downsize to a smaller home, or you can try to borrow some cash from your friends or loved ones. Get as much information as you can regarding these other alternatives. Our article ‘11 Alternatives to Equity Release‘ will explain that very well.

There are so many kinds of equity release plans, and you’ll need to pay some fees: initial charges like financial advice tax, solicitor’s tax, and provider tax, and holdings valuation tax. Different companies and providers have other costs, so just look into that.

You might be wondering…

Why do I need an expert’s advice, and why do I need to pay for one? Well, some providers require that to get an equity release plan. After getting the right direction, you’ll know for sure if it’s the most suitable for you and your future.

What Can a Lifetime Mortgage be Used For

What Can a Lifetime Mortgage be Used For?

You are free to use the money on almost anything you want. There are many reasons for having equity released from your home, and here are a few of them.

Common Uses:

  • To supplement your pension income to cover living expenses
  • To settle a repayment mortgage or clear the balance on an interest-only mortgage
  • To improve your lifestyle
  • To see your family delight their inheritance while you are still here
  • Top up your income in retirement
  • To take that holiday of a lifetime
  • To help your children onto the property ladder
  • To pay off other outstanding balance and lower your monthly outgoings.

Use our calculator to see how much you can release and a good option for you financially.

Is a Lifetime Mortgage Right for Me?

Everyone’s needs and requirements are different therefore it’s important to fully understand your own situation. Remember there are flexible plans available that may fit your varying needs, and some will allow you to repay it in the future without any penalties. A financial adviser can help you find a plan controlled by the financial conduct authority, which will work for you.

Chat with an adviser to get the best equity release advice, answer all your questions, and see how much you can release now. Use our equity release calculator now.

Common Questions

Can I Calculate If a Lifetime Mortgage Is Worth It?

How Does the Lifetime Mortgage Calculator Work?

Is the Lifetime Mortgage Calculator Accurate?

Can You Calculate How Much Money You'll Get With A Lifetime Mortgage?

In conclusion

These types of plans aren’t right for everybody necessarily. Therefore, we think it’s essential to consider and understand all the available options and receive independent financial advice before deciding. It’s also vital that you select one that meets your needs if you choose to use an equity release product.

Everything related to equity release is better than it used to be. After reading about what a lifetime mortgage is, how to calculate it, and how much it’ll give you, you should have a better idea if it’s the right thing for you or not. However safe it may be to take out a plan; it might not be in your best interest. Make sure you do your research and feel free to ask us any further questions.