A home reversion plan is where you are able to sell part or all of your property to a home reversion provider in return for tax free money. This means you release the equity in your home. A home reversion plan is generally available for those 65 years and older. It is only one type of way to release equity that would normally be trapped in your home. However, how would you know the amount of equity that you are able to release with a home reversion? Nowadays, various home reversion providers offer a home reversion plan calculator and interest only lifetime mortgage calculator.
Lifetime mortgages are a second option for you to gain equity from your home when you retire. Lifetime mortgages differ slightly in how they work from home reversion plans. With a mortgage scheme you do not sell any of your home, but take out a lien against your property. Much like the interest-only mortgage, some lifetime mortgage plans allow you to pay interest-only leaving the principle of the loan to be paid at a later date.
The interest only lifetime mortgage calculator is then a highly important tool. This is because you are able to calculate how much equity will be released before you make any appointments with home reversion or lifetime mortgage providers as this could prove to be a waste of time for both you and the provider if you do not like what they have to say. The home reversion plan calculator calculates the amount of equity that you are able to release by knowing your sex, if you are single or not, your age and the value of the property.
A home reversion plan calculator that is available on property websites will give you the total equity released that is less than the actual market value. This means you will not benefit from property value increase. The home reversion provider gets their money back when the house is sold and then they can benefit from market value increase.
The home reversion plan calculator will not be able to give you the exact amount of equity that can be released, but should rather be used as a guideline. If you collect this research and then approach the home reversion provider to request more information you will be able to educate yourself with the full picture. Also, you will be able to run through all of their various home reversion policies that they may have.
For the interest only lifetime mortgage calculator, you will see some additions to the home reversion calculator. You are still asked for the same personal data about you and your home; however, you will have a further calculation of interest to be paid. The interest payment is determined by your current age and life expectancy.
The older you are the lower amount of interest that will accrue during the life of the loan. This is due to a shorter life expectancy than someone age 55. Interest is also calculated based on the value of the property and amount of the loan. If you choose to take a lump sum payment instead of instalments, you pay on the entire loan amount.
If you enter into an instalment agreement in which you only withdraw the amount of money required at the time, you pay interest on the money you have removed from your equity holdings. Certain restrictions apply to interest-only lifetime mortgages including the need to prove disposable income.
When you use an interest only lifetime mortgage calculator you will be able to determine if a monthly payment on interest is feasible and for what amount you can afford in terms of the mortgage. Like the home reversion calculator, this one will help you decide if you are ready to speak with a professional about a possible lifetime mortgage. It also determines if an interest-only option is better than a drawdown, enhanced or basic roll-up lifetime mortgage scheme.
Getting advice from an independent financial adviser may also be the right move as they can explain what the calculated figures mean, and how you would get this type of equity release. When speaking with an adviser be open about your needs, potential future monetary requirements, and living arrangements. If there is a potential need for long term care sooner rather than later, you may find selling the home now is better than an interest-only lifetime mortgage. The interest only lifetime mortgage calculator should be used as a guide to future decision making.