Tag Archives: Enhanced Lifetime Mortgages

What is the Formula for a Home Reversion Plan Calculator?

What is the Formula for a Home Reversion Plan Calculation?

Equity release schemes have seen a massive surge in popularity in recent years with figures continuing to rise in 2013. Year to date figures for October shows there has been over £800 million of new equity release funds released, and is set to reach an all-time high of possibly £1 billion by year-end.

This will be a landmark for the equity release industry after years of care in building its reputation through regulation, financial advice and more innovation in product design from the equity release companies themselves. The main growth area in the types of equity release schemes available has been in the field of lifetime mortgage schemes market. Nevertheless, it is the home reversion plans the London equity release mortgage market has to thank. For this is how back in the 1960’s when the former property equity release schemes were invented.

Why the decline in home reversion sales?

Home reversion schemes in comparison to lifetime mortgages have not seen much change in design or structure since their inception. In fact less than 1% of all equity release schemes written in Q3 of 2013 were a home reversion plan! So what is the reason for their significant decline? One word – Flexibility.

Within the equity release sector, there have been products such as home reversion plans that have lost out to other more flexible and secure options that are now becoming available. Flexible terms of lending such as new interest only lifetime mortgages and the enhanced lifetime mortgage UK are now more popular & freely available. Where a release of equity is necessary and advice is required more than 9 times out of 10 advisers will favour lifetime mortgages & for this reason they have effectively made home reversion plans near obsolete.

After all, demand creates supply, and there seems to be little demand for home reversion schemes on the whole. This is perhaps the reason why several companies that used to have a home reversion calculator have now withdrawn the application from their website.

Where can I find a home reversion calculator?

Old home reversion companies of the past had tools such as a home reversion plan calculator which could help people over the age of 65 assess the maximum they could borrow. Two such companies were Retirement Plus of which they provided the data for companies like Equity Release Supermarket to use on their own website.

Alas when Retirement Plus withdrew their hybrid home reversion/lifetime mortgage plan these calculators were pulled. Unfortunately this left a void in the market. More recently Bridgewater have provided a home reversion calculator for advisers to use, but is also accessible to the general public to use with the right-click!

There are some specific reasons for this decline in popularity. The first reason probably is that home reversion involves selling a part of your home, and not many people are comfortable with that thought. The main advantage of home reversion was that it involved no repayment over the loan term; however, with the arrival of flexible new interest only lifetime mortgages home reversion no longer offers something unique.

Advantages and disadvantages of home reversion plans UK

Another reason is perhaps that home reversion involves this selling a part of house at a highly discounted price, so that you not only lose out on the market value when you start the plan, but also do not benefit from any property price rise on that percentage of the equity when the house is finally sold.

Another significant drawback of home reversion plans is that in case you die early and the plan ends, you potentially lose a valuable chunk of your property in exchange for a highly subsidised price. This can be a big risk for your beneficiaries. But with certain new lifetime mortgages, you can get guaranteed inheritance protection in case of early closure, which is a significant improvement.

Home reversion plans are still very much available however, so there are clearly some advantages to these schemes and they suit some clients. They do offer a large lump sum release, there are no monthly repayments to be made, and by selling only a small portion of the home, you can still protect any inheritance you may wish to leave behind. However, enhanced lifetime mortgages available today can surpass the release allowed by home reversion schemes, and still allow you to retain full ownership of your home.

Home reversion summarised

Companies such as Retirement Plus, Aviva, Home and Capital, and Partnership did offer enhanced home reversion plans, which seem to have now been withdrawn. As stated historically, several reversion companies had home reversion calculators on their websites, but with the decline in demand for these schemes and the availability of new more flexible lifetime mortgages, it is difficult to find a home reversion plan calculator today.

However, the home reversion plan in the UK is not dead & buried and still must have a part to play in the overall equity release advice service offered by any qualified adviser.

You can calculator standard results on the best home reversion deals by visiting specialist equity release broker websites such as – www.homereversion.org

Where Do I Find an Enhanced Equity Release Calculator UK?

Does an Enhanced Lifetime Mortgage Calculator UK Exist?

So what do equity release calculators do, and is there such a thing as an enhanced lifetime mortgage calculator UK?

Until a few years ago, a lifetime mortgage calculator was quite a novel application, only offered by a few select websites that allowed users to quickly calculate how much their equity release plan would endear them with as a tax-free cash lump sum. Today of course, there is no shortage of lifetime mortgage calculators on the internet, as most mortgage comparison and advice websites offer this useful application to users.

The next stage in the evolution of lifetime mortgage calculator was the introduction of the enhanced lifetime mortgage calculator on the internet. Of the four equity release companies that offer enhanced lifetime mortgages, (Aviva, Just Retirement, more2life & Partnership) an accurate enhanced calculator will pull the maximum release from each of these schemes & display these results.

An enhanced lifetime mortgage plan is basically a type of loan that allows you to access the equity tied up into your home, but takes your state of health into account. The mortgage is repaid when the property is sold, when the term of the plan ends, which is usually after you die or have moved into permanent care. At that stage, your beneficiaries will usually have 12 months to repay the lender, which invariably will come from the sale proceeds of the property.

There are different types of enhanced lifetime mortgage schemes UK, each with different lending and repayment criteria. Add to this the fact that each variable, including the applicant’s age, the value of the property, the amount needed to be released etc. determines how the loan is underwritten. The overriding factor with regards to the maximum enhanced release being possible is the severity of the health records. Basically, by completing a health & lifestyle questionnaire and answering the questions therein, will determine the effect it will have on the maximum equity release.

An enhanced lifetime mortgage calculator takes into account the type of equity release scheme, the lending terms of the particular provider, as well as the applicants’ variables such as age, property value, health and loan amount etc. to calculate how much the plan will cost.

An enhanced lifetime mortgage UK plan is different from a regular equity release scheme in that it has more generous terms of lending, based on certain special circumstances related to the life expectancy of the applicant. When it comes to a loan, the shorter the term of the loan, the lower is the risk for the lender. As such, in circumstances where the applicant has compromised health, a chronic illness, or a lifestyle that impinges on their life expectancy, lenders are able to lend at more generous terms.

In addition to offering the regular lifetime mortgage calculator, some equity release comparison websites also have the enhanced lifetime mortgage calculator. For instance, Equity Release Supermarket offers users the choice to get a quote for enhanced lifetime mortgage based on additional relevant information.

So why does an enhanced lifetime mortgage calculator UK need additional information? Because this is the information that it uses to project the expected term of the loan, which in turn determines the figures. The additional information is usually a simple health & lifestyle questionnaire with questions about your age, any serious illnesses, and any chronic health conditions you may suffer from.

The lifestyle questionnaire is used to find out whether any impairment one has will be acceptable to the lifetime mortgage companies to form the basis of any enhanced terms. These impairments or lifestyle choices that help qualify for the enhancements are as follows: –

You height, weight & for some lenders your body mass index (BMI)
Whether you smoke any form of tobacco e.g. 10 cigarettes per day for the last 10 years
Diagnosed with high blood pressure which needs medication
Entered hospital due to a heart attack, stroke or suffer from related illnesses such as angina
Struggle with diabetes requiring medication or even insulin
Diagnosed with cancer needing therapy (excludes certain skin related cancers)
Diagnosed with Parkinson’s disease or multiple sclerosis

Just retiring on the grounds of poor health can get you an enhancement or even the fact that you are taking prescription medication e.g. aspirin can help.

Therefore, similar to the underwriting of enhanced annuities, the equity release market has also embraced the more in-depth knowledge our insurance companies have in associating ill-health with financial products; equity release now being the latest.

But do not fear as there are websites that can help guide you to the relevant companies & tools you can employ that will provide you with the enhanced calculations to inform you of the difference any enhancement can make to the tax-free lump sum.

How do I Establish the Maximum Release with a Home Equity Calculator?

Equity release can be a very useful tool and are suitable for those who want to optimise their assets. It allows you to take a release of equity that has built-up in your property over time. This is where retirees benefit from property ownership of the years. Although there have been many peaks and troughs in house values, the overriding effect has been the creation of mass equity in people’s home. However, is this all beneficial when you cannot get your hands on it?

These equity release schemes can be held even while you are continuing to live in the house, but you do retain 100% ownership rights. The equity release market has opened up in recent times, and today, many different types of equity release schemes and providers are available.

Different equity release schemes operate on different terms. For instance, a lifetime mortgage is available to individuals over the age of 55. In the case of joint applicants, the youngest applicant must also over the age of 55 years. So in a lifetime mortgage, the age of the applicant’s and the value of the property are the main criteria used by the lenders underwriters.

In case of enhanced lifetime mortgages (poor health persists), the main criteria are the health of the applicant’s, age of the applicants, and the value of the property. Each case needs to be assessed individually to determine how much equity can be borrowed. However, it is possible to predict how much you could borrow through the different equity release schemes available on the market through a tool known as equity release or lifetime mortgage calculators.

Calculation qualification criteria

An equity release calculator is an online tool that is designed to use the data provided by the user to work how much equity they could release. The equity release calculator can, based on the age of the applicant, approximate the value of the property, health and lifestyle circumstances of the applicant, and current market data, work out how much an applicant will be able to borrow. However, the maximum figure shouldn’t necessarily be withdrawn all at once. The figure should only be used to ascertain whether you financial requirements can be met, or not.

This can be a useful way to not only determine how much money an equity release scheme can help you borrow, but also the type of equity release scheme that could allow you borrow the maximum amount. The home equity release calculator may not be able to give an entirely accurate figure, as that will ultimately depend on the lender, but it proves to be a very good way to find the right direction in the quest to find the right equity release mortgage.

The free equity release calculator tools can be found online, on reputable and reliable financial comparison sites, or on equity release advice and information websites. It is free to use and a great way to get a sense of which equity release plan might be the most suitable for your needs.