Equity release is becoming more and more commonplace. Greater numbers of retired home owners are utilising equity release to supplement their income, to finance larger purchases or allow them to adequately plan their estate to avoid their beneficiaries paying excessive inheritance tax. The first step in researching equity release has to be to know the maximum lifetime mortgage cash sum available. This will determine whether equity release would provide sufficient funds for your plans. This can be easily determined and enable you to move forward with confidence.
The Formula to Calculate the Maximum Lifetime Mortgage Sum
Unlike a conventional mortgage, lifetime mortgages require no monthly payments, so the formula for calculating the maximum lump sum is not as simple as a certain multiple of your annual income. The value of the property and level of outstanding mortgage is still important to determine the loan to value ratio and ensure that there is sufficient equity in the property for release. However, the main deciding factors to calculate the maximum lifetime mortgage sum are your age, gender and the condition of your health.
The reason for this is that lifetime mortgages are designed to run for the remainder of your lifetime. The company must make an estimation of the time frame in which the loan is expected to run. The companies use your age, gender and medical health to calculate your anticipated life expectancy. For example, statistically women have a longer lifespan than men, so a woman aged sixty-five would be offered a lower sum of equity release than a man of the same age as she is anticipated to live longer. In the cases of joint applications, the age of the younger party will be used for the calculations since equity release allows for ownership rights including the right of residency until death or the person moves into a long term facility for care. This will apply to both parties, so even if one person has passed away, the equity release loan is still in place for the remainder of the lifetime of the other party.
Using an Equity Release Calculator
With all these factors to consider, it can make the formula to determine the maximum lifetime mortgage sum quite complex. However, there are a great many online equity release calculators available. These free tools have been pre-programmed with the qualification criteria and scheme details for the particular range of products. They are simple to use and you need only answer the questions posed based on your age, gender, property and health condition. This information will be collated by the calculator and assessed against the criteria for the different lifetime mortgages and other equity release schemes.
Once all of your details have been assessed, the calculator will supply a maximum lifetime mortgage sum available for your circumstances. Some of the more in-depth calculators will also provide examples of interest rates and product details of the schemes which are best suited to your requirements and circumstances. This will enable you to compare the different schemes and assess the benefits for yourself.
It is always a good idea to use multiple equity release calculators to ensure you gain an accurate picture of the marketplace. Some calculators are provided by companies which do not offer enhanced packages based on your health, which could mean that you qualify for less equity release than you would with other companies. It is also important to ensure the accuracy of your information. The calculators are purely a mathematical tool; they have no capacity to assess current property values or determine the accuracy of the figures you have entered. Therefore, it is worth taking a little time to research the current property market to estimate your property value and ask your current mortgage lender for an up to date balance on your outstanding mortgage. This will enable you to be confident in the amount of equity in your home and be assured that you can rely on the figures provided by the calculator.
There is no restriction on how many calculators you can use. They are free and confidential, so it is worth using a different variety to obtain a full picture of the equity release market. Although you may be interested in your maximum lifetime mortgage sum, you may find that other equity release schemes offer a more beneficial package which is better suited to your needs. It is only through exploring the formulae used by the different calculators will you get a better idea of the scope of products and plans which you would qualify for.
If you are considering equity release, your first consideration is likely to be the maximum lifetime mortgage sum available to you. However, it is important to realise that this is not necessarily the only deciding factor. You should also consider the impact of different interest rates and any restrictions which may be imposed with the scheme. Before making any form of commitment, you should seek professional advice from an adviser who specialises in equity release.