ARCHIVE - Step-by-Step: How to input a Home Equity plan **Voyant Adviser, UK**

The Debt > Home Equity screen should allow you to model an existing or future equity release scheme. Additional notes follow:

Linking the Equity Release to a Property/Asset

The equity release plan must be linked to a property/asset in the plan. The 'Asset' drop-down allows users to select from properties entered separately via the Property/Assets screen.

Note that once the equity release plan is linked to a property/asset it will inherit the ownership and timeline of the property to which it is linked. Linking is important, and required, because the potential sale of the relevant property/asset will result in the attempted pay-off of the linked debt, using any proceeds from the sale.

New Equity Release Plans

For a 'New' equity release, the homeowner(s) can receive some combination of a one-off, tax-free, lump sum, and/or an income, paid over the remaining life of the property (i.e. until the property is liquidated, at Mortality, or before). As illustrated, below, the 'Mortgage Balance' must be at least as great as the combined 'Lump Sum', plus any 'Mortgage Fees'. If the 'Mortgage Balance' is greater than the sum of these, the software will calculate a 'Payment Amount'.

Note: As with any lump sum in-flow (e.g. tax-free cash payments, windfalls, lump sum payouts from protection policies), any funds from the loan that are not specifically accounted for, i.e. allocated to savings, and/or expenditure, will be deposited automatically into the owner’s default cash account (e.g. Chris’s Cash), where the funds will accrue, until such time as they may be needed. The software uses the ownership of the linked property/asset to determine who will receive the equity release funds. If the property is co-owned, for example, the lump sum payment will be divided between the owners, and deposited into their respective default cash accounts, if not spent or transferred into other savings or investments.

Existing Equity Release Plans

For existing equity release plans – under "New?" set to 'No' - one can specify an equity release that pays-out over time, beginning from the start of the plan. The Credit Limit and Credit Limit Growth Rate entries determine when payments are stopped. Payouts stop once the balance, which grows via payouts and the interest rate, exceeds the calculated credit limit.

The Credit Limit is the maximum amount of credit (outstanding balance that has been accrued) before payments stop. The outstanding amount is calculated by adding the current Balance on the plan (including interest), plus the total of payments (and interest).  Once this total meets and exceeds the credit limit, no more payments are made.

Tracking Equity Release Plans in the Let’s See Charts

The Let’s See chart will show inflows from an equity release plan in a light green colour.

Additional information can be viewed via the 'Detailed Info' panel.

- Inflows from the equity release plan (either lump sum for new plans or yearly payments from existing ones) will be shown on the Cash Flow tab. 

- The Investments tab will show the deposit of any lump sum inflows from a new equity release into the owner’s (or owners’) default cash accounts(s).

- The Property tab will show the deduction of the borrowed amount from the linked property’s equity.

- The Debts tab will track the balance of the debt and the interest accrued to this balance.

The Debts chart, within the Let's See screen (selected via the 'dropdown menu' below the Let's See chart itself), also presents a view of the equity release loan.

When a property is liquidated, the proceeds (Sale Price) will go first to pay the balance of this linked debt. Any remaining revenue will be paid to the former owner(s) of the liquidated property.