Retirement is a great time in your life. You worked hard to reach this age as a way to enjoy life. You enjoyed life before, but now you have the freedom you have not had since you were a kid looking to enter school. Actually, not even then, because you had parents telling you what to do. At retirement you no longer have a boss, parent, or other person telling you what to do and huge consequences if you do not fall in line. Yet, statistics have shown that UK retirees have not saved up enough during their working life to afford retirement. This is where the equity calculator comes in handy.
The Woes of Retirement
Two recessions, employment woes like not getting a raise due to the recessions, and inflation all affect retirement. If you invested in stocks you might have lost a great deal of your retirement fund because of the stock market fluctuations. Hitting retirement you have not had enough time to recoup these losses. More retirees are also living longer than the life expectancy even ten years ago. New medicines, technology, and much more is ensuring you live longer.
While it is great to live longer, without increasing your retirement portfolio you are in a difficult situation. There is a higher potential for you to run out of funds in retirement particularly as you become older and need more care.
Some individuals are already in this situation.
The Solution to Woes
There is a solution called an equity release or ER. It is a product designed for retirees. There are companies who lend to over 55s, while some wait until you are 60 or 65 before they lend money. In either case, you have a product that can produce money based on the value of your home. Most retirees are cash poor, but equity rich because they spent a lifetime paying off a mortgage.
With this product you do not make a payment of interest or principle balance. The interest and balance is due at your death or when you decide to sell the home and move on. It is a product that allows you to have cash when you need it.
The solution allows you to plan for your retirement or for your older years in retirement. For example you might be 65, newly retired and know you are going to run out of money at age 80. If you take out an equity release at 75, you can extend your retirement money and live comfortably for another 25 years, perhaps.
The Calculator for Planning
Using the equity calculator for retirement planning gives you an idea of potentials. Obviously if you are not ready for an equity release product the results can change by the time you are. In five years products may be better or offer less in a lump sum. The interest rates will definitely be changed. Yet, you can still plan for this and assess your current situation. Using a calculator allows you to focus on the changes that need to occur. Perhaps you can start to lower your current standard of living to save enough of your current retirement fund to last you enough years. You might be able to save enough to lower what you need in an equity release.
How the Tool is Designed to Work
The calculator uses two things to arrive at a loan to value percentage: your age and home value. Your age determines your life expectancy. Someone who is younger is most likely going to live longer than someone already heading towards 80. Usually companies offer more money to an older individual or a sick person because the money will be returned faster than a healthy individual. It is the premise that always has exceptions since life is definitely uncertain.
The home value is an appraised number given to your home. It is the equity potential of your home. A home worth £100K could offer you £30,000 in an equity release if you are 65 years of age. There are companies willing to offer a loan to value percentage of 30%. Basically the lifetime mortgage calculator is going to give you a result that you can plan around.
You can test out different ages, different values, and different company products to see what you may be able to get. The equity calculator is always going to offer you a percentage estimate. Only when you are ready to take on an equity release will you truly know the exact amount you can receive.