When was the last time you had a surveyor or estate agent out to your property? Perhaps it was when you took out a loan to buy the home in the first place? Most people do not get appraisals every year. They only get their house appraised when they are looking for a financial product such as a mortgage or in the case of retirees an equity release. Given this parameter you may be unaware of what your property is valued at and yet you need it for the equity release calculator to get an accurate result.
Finding Property Value Data
As you probably do not know the value and you are not ready for an equity release company to appoint a surveyor for your application, you will need to access the Internet. Zoopla.co.uk and nethouseprices.co.uk are two websites which show recent sales, pending sales and properties on the market. What you want to look for is recent sales. A property that has sold is an actual value of worth, while a property still on the market may indicate the housing price is too high or there is something else wrong with it. Pending sales can be used, but again a pending sale is not a sale so it could fall through.
A surveyor or estate agent is going to look first for home sales in your postcode for comparison. You should do the same. If there are no homes with the same square footage, number of rooms and bathrooms and age of home, then you may need to branch out. You have to find something that is comparable in size, age, and number of rooms and bathrooms otherwise the value could be completely wrong. This is where pending and for sale may be used.
You can also look in the newspaper on certain days to see properties for sale. A surveyor of course will check for sales first before they branch out to other means of finding value. They also pull the last recorded value to ascertain a value.
Factoring in Age
Age is also going to apply to the equity release calculation. Once you find sales that are similar you should have a value that is approximately the value a surveyor would use. As it is a guess estimation the result may differ from the equity release company. Another area that could skew results is the age you use.
You need to use the age of the youngest homeowner. This is the homeowner that has the right to make decisions about the home and not the youngest person in the house. The youngest homeowner has to be at least 55 years of age to qualify for equity release products on the market. Some companies might require you to be 60 or 65 before they offer equity release schemes.
By going with an independent broker and independent equity release mortgage calculator, you can learn about all products on the market and check a range of ages to see what the maximum property value released can be.
Calculating the Percentage
Each company has a different loan to value percentage for 2014 although it may be within a few per cent of each other. For example, Aviva might be 30% loan to value percentage at age 65, whereas Pure Retirement offers 31% for the same age.
You will need to enter the current property value, your age, and then click submit. The calculator will tell you the percentage possible for that age. It can also give you a value in pounds that can be released.
If you go with Aviva at 65 years of age and the maximum amount with a home worth £200K you could release up to £60,000.
What Should You Release
Although you have used an approximate property value based on the sales in your area, you can feel comfortable with the maximum sum it has given you as a guide to making your decision to speak with an independent broker. You also want to consider taking out a smaller percentage than the maximum available so that you can leave behind an inheritance.
If you do not need the maximum there is no reason to take it all out. Interest compounds on the loan which is why the loan to value percentage exists. It ensures you are not going to add too much interest to go over the value of the home based on life expectancy. Always seek a second opinion to the equity release calculator to make sure of the amount you can truly release.