This calculator provides an estimate only. Consult with a qualified financial advisor for personalised advice.
Understanding Equity Release
Equity release allows homeowners, typically aged 55 and over, to unlock some of the value tied up in their property as tax-free cash. This can be a valuable option for supplementing retirement income, covering care costs, home improvements, or helping family members financially, without having to sell their home.
How Equity Release Works
There are two main types of equity release schemes:
Lifetime Mortgage: This is the most common type. You take out a loan secured on your home, which you continue to live in. You typically retain full ownership. Interest is charged on the loan, and it accrues over time. The loan, plus accrued interest, is usually repaid when the last homeowner dies or moves into long-term care.
Home Reversion Plan: With this plan, you sell a portion or all of your home to a provider in exchange for cash. You can continue to live in your home rent-free for life. When the property is sold, the provider receives their share of the sale value, and you receive your remaining share. You can usually buy back the provider's share at any time.
Calculating Your Potential Equity Release
The core of an equity release calculation involves determining the amount of equity you have available and then calculating a potential lump sum or income based on that equity and the specific terms of the product. Our calculator uses the following logic:
Calculate Total Equity: This is your home's current value minus any outstanding mortgage or secured loans.
Total Equity = Current Home Value - Outstanding Mortgage
Calculate Available Equity to Release: This is a percentage of your total equity that you wish to release.
Available Equity to Release = Total Equity * (Percentage of Equity to Release / 100)
Determine Potential Lump Sum: This is the cash amount you could potentially receive. It's important to note that equity release providers have their own criteria regarding age, property type, and health, which can affect the actual amount offered. The "Average Equity Release Rate" is an indication of how the loan might grow over time due to interest, but the initial lump sum is directly derived from the available equity.
Potential Lump Sum = Available Equity to Release
Important Considerations:
Interest Accrual: For lifetime mortgages, interest compounds over time. The longer you have the loan, the more interest will be added, reducing the net equity left in your home for your beneficiaries. The average interest rate provided is a crucial factor in understanding the long-term cost.
Fees: Equity release plans involve various fees, including arrangement fees, valuation fees, and legal fees, which can reduce the net amount you receive.
Impact on Inheritance: Releasing equity will reduce the value of your estate that you can leave to beneficiaries.
Downsizing: If you decide to sell your home and move, you will need to repay the loan plus accrued interest.
Eligibility: Specific age and property requirements apply.
This calculator provides a simplified estimation. It is essential to get personalised advice from a qualified, independent equity release advisor who can explain all options, risks, and implications specific to your circumstances.
function calculateEquityRelease() {
var homeValue = parseFloat(document.getElementById("homeValue").value);
var outstandingMortgage = parseFloat(document.getElementById("outstandingMortgage").value);
var percentageOfEquity = parseFloat(document.getElementById("percentageOfEquity").value);
var averageInterestRate = parseFloat(document.getElementById("averageInterestRate").value);
var resultDiv = document.getElementById("result");
resultDiv.style.display = "block";
resultDiv.innerHTML = ""; // Clear previous results
// Validate inputs
if (isNaN(homeValue) || homeValue <= 0) {
resultDiv.innerHTML = "Please enter a valid Current Home Value.";
resultDiv.style.backgroundColor = "#dc3545"; // Error color
return;
}
if (isNaN(outstandingMortgage) || outstandingMortgage < 0) {
resultDiv.innerHTML = "Please enter a valid Outstanding Mortgage amount.";
resultDiv.style.backgroundColor = "#dc3545";
return;
}
if (isNaN(percentageOfEquity) || percentageOfEquity 100) {
resultDiv.innerHTML = "Please enter a Percentage of Equity to Release between 1 and 100.";
resultDiv.style.backgroundColor = "#dc3545";
return;
}
if (isNaN(averageInterestRate) || averageInterestRate < 0) {
resultDiv.innerHTML = "Please enter a valid Average Equity Release Rate.";
resultDiv.style.backgroundColor = "#dc3545";
return;
}
// Calculations
var totalEquity = homeValue – outstandingMortgage;
if (totalEquity <= 0) {
resultDiv.innerHTML = "You currently have no or negative equity in your home. Equity release may not be possible.";
resultDiv.style.backgroundColor = "#ffc107"; // Warning color
return;
}
var availableEquityToRelease = totalEquity * (percentageOfEquity / 100);
var potentialLumpSum = availableEquityToRelease; // In a simplified model, this is the initial release
// Display results
resultDiv.innerHTML = "Potential Lump Sum You Could Release:" +
"£" + potentialLumpSum.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",") + "";
resultDiv.style.backgroundColor = "#28a745"; // Success color
}