Equity Release News

How Does a Home Reversion Calculator Work?

Home reversion calculator

A home reversion plan is a secure way for homeowners to generate income or obtain a tax free capital sum from their property. It is a form of equity release scheme, but unlike other types of equity release schemes, it is not exactly a mortgage whereby interest is charged. Instead, a home reversion involves the selling of the property, or a part of it, while remaining in situ at the same time. A home reversion calculator can be used to help you decide if selling the entire home is in your best interest.

A lifetime tenancy agreement is signed providing you with security of tenure for life. Home reversion plans are one of the oldest equity release concepts and have been on the market for a while now, but their popularity is declining as lifetime mortgages become more flexible and influential. This is yet another reason to consider the benefits by using a calculator to show you the difference in monetary benefits.

Homeowners can get an indication of the amount of capital they can raise by using a home reversion calculator. In most cases, home owners are allowed to raise between 1% up to 55% of the value of their property, but the exact percentage that can be raised is dependent on a number of factors. To qualify for a home reversion scheme you must have a minimum age of 65 with a property value of at least £75,000.

The percentage of money given to you for the value of your property is determined by many things, which are coincidentally some of the fields you need to fill in on the home reversion calculator. Certain key fields must be filled in to determine the amount that the home owner is allowed to raise. The two key fields that must be filled out are the age of the applicant and the value of the property. These two factors are very important. The older you are and the higher the value of your property the more you will be able to gain.

If you have decided to sell half of your home, you cannot expect to get full value for that half of the home. For example, if your home is valued at £200,000, and you want to sell 50% of your home you would not get £100,000 for that half. A home reversion provider will give you a lower percentage than the market value. This is why the home reversion calculator is important. It tells you the percentage the provider is most likely willing to give you based on age and home value.

It is important that you fill in these two required fields accurately otherwise you will receive false data from the calculator. This can lead you to making wrong decisions based on the fact that the data that you receive is incorrect. You do not want to expect to raise more than you can actually release, and on the other hand, you do not want to be de-motivated by releasing less.

If you do not know the value of your property, do not guess it. Have your property valued by using a local estate agent or conducting your research online via companies such as Right Move. The more accurate the information inputted is, the better the results will be provided by the home reversion calculator.

Never use the calculator as perfect or exact. No two home reversion providers will offer the same deal. Like all products and services there are differences in order to create a competitive edge. One provider might be willing to offer a higher percentage of value, but require more clauses to the contract. Another company might offer less value, but be willing to offer a fairer market value on the remaining portion of the home sold once you move out or expire.

The calculator is only a guide to give you some indication of what you might be able to obtain from a home reversion provider. It can also be used to help you decide between home reversion and lifetime mortgages. Briefly, a lifetime mortgage is a loan on your property that is repaid when you sell it or die.

A lifetime mortgage requires repayment and interest. It leaves behind a debt and while you may find you obtain more equity in a lump sum or monthly instalment it can become more expensive in the end. You also have a potential loss of inheritance. By using the home reversion calculator you can assess your situation more clearly.