Before using a home reversion calculator, it is best to understand the product it is going to give you values for. You should be aware that there are two types of equity release schemes on the market. This is in the sense of categories in which there are different forms of the product. You have the option of choosing between a lifetime mortgage and home reversion. They are definitely different in how old you need to be, plus how they work. If you use a lifetime mortgage calculator, the results shown are not going to be the same as with a home reversion. Therefore, it is imperative that you seek the right tool for the product you intend on using.
Qualifications for Home Reversion
The first qualification is age, which also happens to answer the question the title posed. You need to be aged 65 or older in order to obtain a home reversion plan; therefore, you need to be at least 65 years old to get proper results from the home reversion calculator.
You could be 55 and use the calculator, but in ten years the results are going to change. A lot can happen in ten years. Just look at 2007 to 2014 in terms of economics. The subprime mortgage bubble burst, the UK was subjected to two recessions, and only in the last year and a half have housing values made a significant rise from the depreciation during the mortgage crisis. In ten years something could happen to appreciate and/or depreciate your home five times over or you could have a steady rise. You might lose your job, gain a new one, get a raise, and the list can keep on growing.
There is one reason to use the calculator if you are not of age, which is for retirement planning. If you know what you need and can get now, you can plan to save up.
The second qualification is home value. The value of your home has to be at least £60,000, according to most providers. The home value plus your age determines the loan to value percentage you can receive.
Loan to Value Percentage
With home reversion this is a bit of a misnomer. Home reversion is not actually a loan. Instead, you sell a part or all of your home. The amount of home you wish to sell is going to determine the maximum amount you can get under this type of equity release.
Home reversion allows you to remain in your home with a lifetime tenancy agreement. You get to use tax free cash in a lump sum form without making additional payments. You never have to repay the money and there is no interest. The buyer is investing in your demise. It’s a cold way to put it, but true. Everyone will eventually expire and the buyer recoups their money plus they gain a profit when they sell the home to a new party.
The loan to value percentage is a value the company is willing to offer you for the sale or partial sale of your home. The percentage is based on how long you are going to live. The shorter amount of time you are expected to have, the more money the company is willing to lend you. The return is considered faster, whereas a younger person could be in their home for another 35 years. They need the money to last, more home to sell if they run out, and the company wants to ensure they will have a profit.
What can you get?
If your home is £100,000 in value, you are 85, and you want to sell 50% of your home, you can get more than if you were 65. At 65 you may only be able to get 20% of that 50% you sell, whereas at 85 you might be able to get closer to the 40% level. This is what the calculator can help you find out. They can give you an estimated result of how much a company is willing to provide you based on your age, the home value, and the amount you wish to sell.
Given that you have an asset, it is one of the better ways to make your retirement more comfortable. It is important to remember any results from the home reversion calculator is just an estimate, a guide if you will, designed to provide you with information to start a home reversion discussion with an independent broker.