There are numerous types of calculators available online to help you get answers to your questions including options for mortgages and equity release products. There are always going to be distinct differences when it comes to how these various calculators work, so you need to be clear on what they do and whether they are the same because the names are similar or not. In the case of an equity release calculator and equity calculator, you have two different types of calculators designed to give you two different answers, even when the names or keywords sound the same. In fact, you might run into a site that uses both phrases only to find out there is just one type of calculator available to you.
Unfortunately, some websites are misleading in order to get all consumers to visit, and most particularly those that can use their products. It is a long story but basically it goes back to the original concept of marketing for consumers with the new Internet. Now we are more refined and get into niches to ensure proper targeting. As long as you keep this in mind, you can search properly for exactly what you want.
Equity Release
An equity release calculator is specifically designed to target lifetime mortgages and home reversion. It is for individuals who are over 55. This is because the market for these equity releases is for those who are over 55 and heading into or already in retirement. These products provide money to supplement what used to be incoming from a job. It keeps you in the lifestyle you enjoy without making major changes.
Equity
An equity calculator is for residential mortgages, secured loans, and similar products designed more for individuals who are under the age of 55. As long as you have a steady income and can prove the income, you are able to get these types of loans. In recent years certain mortgages like interest only have not been offered above certain ages such as 65 because they are due to be paid at 75, when the person will be in retirement and may not have the funds to make the monthly repayments of interest. This is also different from the interest only lifetime mortgage which allows for interest repayment, but has the cap of a lifetime for the individual. Again, lifetime mortgages are for those aged 55 and over versus the interest only product that is not.
Understanding the Differences
Now that you know the calculators are for different age groups, it is possible to discuss the generic details of each in more context. An equity release schemes calculator is designed to use your age and the home value to tell you a maximum allowable lump sum. The older you are, the more money you can unlock from your home’s equity. This is on the assumption the money will be paid back sooner because you are closer to your death or needing long term care in a facility, versus living in the home. The more value in the home, the more you can obtain in a loan as well. Equity release works on the concept of loan to value percentage, where you get a certain per cent of the home based on the accrual of compounding interest over your expected lifetime.
With standard mortgages for the under 55s, mortgages are set on a fixed term. For interest only it is usually 10 years, where the principle balance must be paid in a balloon payment at the end of those 10 years. The interest is paid monthly. A 30 year fixed loan obviously has all payments in by the 30 year mark, although many refinance and thus extend the terms for another 30 years. The point is you are making payments throughout the mortgage as a means of dwindling the amount owed at the end.
With equity release you are not, so you pay interest in full plus the capital sum in full at the very end. It makes for one very large payment. The calculator for simple equity loans has to account for the length of term you will have the loan for such as 10, 15, 20, 25 or 30 years. It also accounts for the value of the property based on the amount you need to get the loan and pay for the property or to take equity out. You can usually release up to 85% although sometimes only 75%. Thus when you look for an equity release calculator you do not want an equity calculator to give you results and vice versa.