For people of retirement age, equity release can be a great financial solution. This can be especially important when the home owner is suffering from ill health. The equity release companies are aware of the financial pressure ill health can cause and many now offer impaired life equity release scheme products. These offer a greater percentage of equity release to those with medical conditions or illnesses which have impaired the life expectancy of the applicant.
Why equity release calculators are important
Most equity release providers offer a free online calculator to assist potential customers in determining how much they could borrow. This is because the formula used to calculate the amount of the equity release sum is usually more complex than it would be with a conventional loan or repayment mortgage. Since equity release products would generally require no monthly payment so your income is irrelevant. However, your age, gender and state of health become important factors. Many calculators have access to impaired life equity release scheme details which means that you can gain a good insight into how much you could potentially borrow.
How do equity release calculators work?
Equity release calculators calculate their responses based on the data you have entered. It will pose a number of different questions and you will need to supply accurate responses. Most calculators will ask questions based on:
• Your age: Equity release schemes usually base their figures on your current age or if it is a joint application, the age of the younger applicant. Since the younger you are, the longer expected lifespan, generally the older the applicant the greater the available sum for release.
• Your state of health: This is again used to calculate your potential estimated lifespan. There are a number of companies and providers offering an impaired life equity release scheme for those with poorer health. Generally, the worse your state of health, the greater percentage of equity can be released.
• The current market value of your home: This works in a similar way to a conventional mortgage since there is a particular loan to value ratio which is adhered to.
• The current balance of any existing mortgage: This will restrict the amount of equity available in your home. The balance will need to be deducted from the value of your home to determine the amount of equity available in the property.
Will the calculator show my options?
Many of the calculators available on websites today offer an illustration of the different options for which you would qualify. These will include:
• Roll up mortgage: This type of scheme works in a similar way to a conventional repayment mortgage. However, the main exception is that instead of making a monthly payment to cover repaying the loan and interest, the interest is compounded annually on to the balance of the loan. The loan is only paid in full when you move into long term care or pass away. Your property is then sold and the loan balance settled; any remaining funds pass on to your beneficiaries.
• Interest only mortgage: This type of scheme allows for you to make a monthly payment to cover all or part of the interest charges. This enables the balance of the loan to be kept fairly static and for you to manage your potential estate a little more clearly.
• Draw down mortgage: This scheme allows you to have a draw down facility rather than taking an initial large lump sum. You can call down the funds as and when they are required but you would only pay interest on the funds which have been released.
The type of plan offered as an impaired life equity release scheme, will vary according to the specific terms and conditions of the provider. It may be one of these types of arrangement or may have other restrictions or limitations imposed.
If you are considering equity release and believe that your medical condition or state of health may qualify you for an impaired life equity release scheme, it is worth investigating the options fully. Many providers offer extremely attractive terms for those with serious or chronic illnesses including cancer, diabetes or heart disease. However, there are a number of providers who will consider lifestyle elements such as smoking when assessing qualification for an impaired life equity release scheme. It is worth using a number of different online calculators to determine whether you would qualify for such a scheme and what the maximum sum offered would be. However, these calculator tools should not replace the expert guidance of an experienced equity release adviser.