Using an Equity Release Calculator to help decide on how much cash you could release?


Jan 23, 2015
Using an Equity Release Calculator to help decide on how much cash you could release?

There has been a great deal of publicity in recent months about the growth in popularity of what is known as “equity release” and how it can be used to free up some of the equity in your home to provide an immediate lump sum, to enhance your capital, your income or both. 

There is still some confusion, however, about what equity release actually involves, how it works, its potential benefits, the complexity of the process and just how much cash can be released. In this article, therefore, we will try to clarify all of those issues. 

What is Equity Release?
As mentioned above, equity release is basically a way of releasing some of the capital in your home to use however you wish. It is available if you are over 55 years of age and are a homeowner. It works in a similar way to the mortgage that people take out when they purchase their home because the amount of cash that is released will be secured against the property. 

Where it differs, however, is that this type of mortgage, which is known as a “lifetime mortgage”, does not have any regular repayments.  Instead, the interest that is charged on the sum released is added to the amount outstanding at the end of the year. This means that the loan will increase until it is repaid, which is normally when the homeowner (or both of them in the case off a jointly owned property) dies or the house is sold.

The Benefits of Equity Release
Equity release offers an opportunity to improve your standard of living during retirement by providing extra cash to spend on things that you need or want that you would not otherwise be able to afford. It can also offer the chance to increase your regular income, which can be particularly useful when interest on your cash savings is so low.

How Complicated is Equity Release to Arrange?
The simple answer is that arranging an equity release is a quite straightforward process. When you apply for an equity release loan, through a lender that is regulated by the Financial Conduct Authority (FCA), your home will be valued and a legal mortgage prepared by a solicitor, who will also advise you regarding the legal implications of the arrangement. When the mortgage deed has been completed, the lump sum is paid to you and the interest starts to run. The process is as simple as that.

How Much Cash Can You Release?
Ultimately, the question of how much equity you can release from your home is a decision for the mortgage company. Their decision is normally based upon the amount of equity in your home and your age. The percentage of the equity that can be released may vary between lenders, as can the interest rate that they charge so it is always wise to shop around and/or take professional advice as to the best deal for you.

If you want to ascertain how much equity you are likely to be able to release, there are some really helpful online equity release calculators, which will quickly and easily  provide you with an idea of approximately how large a lump sum a  lender would be prepared to offer. 

Summary
Whether to take out an equity release loan is ultimately a personal decision, which should be taken only after careful consideration and should also involve obtaining independent financial advice. If you are over 55, however, require a cash lump sum and own your own home, it can be a relatively simple way of raising capital. 

If you are thinking about equity release, an enquiry using an equity release calculator will give you a good indication of whether you are likely to qualify for a loan and, if so, the approximate amount.


Ashley Shepherd is an Over 50s Personal Finance Expert

ashley shepherd

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