If you’re looking to release equity in your property, then you’ll find our equity release calculator very easy-to-use. You merely enter your age, the worth of your property, any outstanding mortgage, and that we will calculate an indicative level of equity release for your situation.
Despite the very fact that anticipation within the UK has improved and our working lives are extended there’s often limited access to traditional remortgages/equity release mortgages for the over 50s. This created a vacuum for older homeowners looking to release equity which has been filled by companies offering lifetime mortgages and residential reversion schemes. So, what does one got to consider when looking towards azmoney.co.uk as an older homeowner?
Simple Calculation
Before we take an in-depth check out equity release and therefore the various aspects to think about, it’s worth reminding ourselves of the indicative equity release percentages for various age groups. All things being equal, the equity release figures for those over 55 are as follows.
We will use the subsequent example to offer you a thought of the calculation:-
- Property value: £500,000
- Outstanding mortgage: £100,000
- Homeowner age: 55
Looking at the above table, you’ll see that a home-owner aged 55 looking to release equity would, in theory, be ready to release 24% of internet value of their property.
The calculation is as follows:-
£500,000 – £100,000 = £400,000 x 24% (age) = £96,000
This is an estimated result because the particular figure may vary slightly counting on the homeowner’s individual circumstances/criteria of the lender. However, these figures will offer you a thought of what to expect.
Can You Stagger Equity Release?
In a sign of the days, competition within the equity release marketplace for older homeowners has seen the introduction of a staggered equity release option. This basically means you’ll arrange a lifetime mortgage but the sole drawdown the cash as and once you need it. As a consequence, you’ll only pay interest on each drawdown from the date that you simply actually receive the funds.
If you arrange endless drawdown facility, then you’ll pay less interest on the withdrawals closer to the top of your mortgage. It’ll obviously depend on the extent of funds you’ve got taken as an entire, and therefore the frequency of drawdowns, but this will cause very helpful interest savings.
It has to be said that the bulk of lifetime mortgages involve lump-sum payments, except for those looking to supplement their income within the longer-term a staggered equity release could also be the simplest option.
Interest Charged On Lifetime Mortgages
As we touched on above, you ought to expect to pay a premium over and above traditional mortgage interest rates although things has improved lately. At the top of 2019, the typical lifetime mortgage rate of interest stood at 4.91%, which remains above the normal mortgage rate, but the gap is certainly reducing.
Looking longer-term there are two specific issues to require into consideration:-
Increase in Demand
There is little question because the demographic of the united kingdom continues to change; we are all living longer and dealing longer, there’ll be more demand for equity release from older homeowners. In 2019 the equity release marketplace for older homeowners was worth a staggering £4 billion, and this is often expected to point out more growth within the short, medium and long-term yet.
It is also worth noting that UK base rates are at or around their historic low for over a decade. Many experts believe there’s limited upside potential briefly to medium-term. Therefore, this may influence the rate of interest on lifetime mortgages within the short term.
Might low interest rates tempt even more people to think about releasing equity from their property?
Increase in Competition
The fact that the typical lifetime mortgage rate of interest has fallen to 4.91%, a historic low, also reflects the growing level of competition during this area of the market. Many of us forget that the typical UK property is now valued well in more than £200,000. If these properties were bought back within the 1980s/90s, there’s every chance they’re mortgage-free and made up wholly of equity.
As a consequence, we’ll likely see new entrants to the market within the short, medium and long-term. At now, it’s also worth noting that the interest on lifetime mortgage (indeed any mortgage) should be considered in relative terms.
The average rate for a lifetime mortgage is currently 4.91% with UK base rates at 0.1% but when base rates eventually increase, lifetime mortgage rates (and lending rates in general) also will move higher.
