A Complete Guide to Enhanced Lifetime Mortgages
I think you’ll agree with me when I say…
Parkinson’s disease, high blood pressure and other medical conditions can give your life a turn for the worst. However, an enhanced lifetime mortgage plan can serve you a definite edge when it comes to these illnesses since it allows you to borrow more.
However, without the right information, you can get confused. Lucky for you, this will supply a comprehensive review of the qualification criteria, the pros & cons of impaired lifetime mortgages, and the companies that offer these plans.
If you need more information on lifetime mortgages though, be sure to read the on ‘What’s a Lifetime Mortgage.’
What’s an Enhanced Lifetime Mortgage?
If you are looking to release the maximum amount of equity1 from your property or have your plans provider charge you a potentially lower interest rate, then taking the enhanced lifetime mortgage plans could be your golden key to a happy retirement.
The enhanced lifetime mortgage,2 which is also known as the ‘impaired’ lifetime mortgages, is an equity release scheme where the lending criterion is dependent on your health records.
The plans allow you to unlock more equity based on the answers you convey on the health and lifestyle questionnaire your lender will provide.
In other words, the weaker your health, the more equity you can unlock, and the lower the interest.3
If this scheme does not suit your needs, however, be sure to check out the on ‘Types of Lifetime Mortgage Schemes’ get to choose the plans that will help you solve your financial needs.
The Mechanics of an Enhanced Lifetime Mortgage Plan
The latest invention of the equity release market, although not new in concept, is the enhanced or impaired lifetime mortgage scheme which is every so often labelled as an ‘ill-health equity release’. It allows homeowners to unlock more equity from their homes.
Your lender offers this plans on either a lump-sum or drawdown basis. Similar to the enhanced annuity plans, the enhanced lifetime mortgage provides you with a favourable lump-sum and the more severe your health history, the more money you get. The premise behind the enhancement is a lower life expectancy.
You get a capital lump sum from the outset which is successfully a release of equity from your residence. You don’t make any monthly payments and the tax free cash you unlock then attracts a fixed duration interest rate which compounds over the life of the loan.
Once, the last homeowner breathes their last breath, or moves into residential care, the lender puts up the property for sale and use the proceeds to pay off the mortgage primarily, and the balance goes to the heirs or the estate.
What are the Qualification Criteria?
Your qualification for the enhanced lifetime mortgage plans4 depends on your health history. It’s because your plans provider operates on the underwriting principle that one’s life expectancy is likely to be reduced if you have experienced ill-health.
They offer you an honest health and lifestyle questionnaire, which will consider the following:
- If you are a cigarette or rolled tobacco smoker.
- Your body mass index (BMI).
- Whether you have high blood pressure.
- Medical complications such as angina, heart attack, strokes, etc.
- If you have been diagnosed with cancer requiring surgery, chemo or radiotherapy.
- Multiple sclerosis or Parkinsons condition.
- If you suffer from diabetes.
- If you retired early due to ill health.
- If you are on prescription medication.
The list is by no means comprehensive, and if you have any other serious health and lifestyle concerns, it could mean that your broker will allow you to release a more substantial cash.
What are the Benefits?
The advantage of taking out an enhanced lifetime mortgage plans allows you to enjoy several benefits which consist but are not limited to:
- It offers you a more significant lump sum than the standard equity release schemes.
- It allows lower interest rates than the standard equity release schemes.
- It is one unique financial product since it allows you to benefit from having a poor health record.
- The equity you unlock can allow you to make some much-needed home modifications if your medical issues are mobility-related.
- The plans are available, enabling you to withdraw funds in stages.
- You do not require a medical.
- Even after taking the biggest amount of cash, the plans stills safeguards you with the ‘no negative equity guarantee’5 schemes.
- The questionnaire you complete is simple and straightforward
What are the Pitfalls?
Like with any other equity release schemes, there must always be a degree of caution. Some of the facts you need to consider:
- By unlocking the maximum enhanced equity release, you might hand little or no inheritance.
- The interest rates, in as much as they are minimal, tend to be higher than on conventional standing mortgages.
- The plans could take longer to set up if your broker requires you to provide a doctor’s report.
- Taking a more considerable lump sum might affect your entitlement to means-tested benefits.
- The companies could levy early repayment charges if you decide to settle the plans earlier than intended.
Which Companies Offer these Mortgage Schemes?
Equity release companies specialising in the impaired lifetime mortgages plans include, but are not restricted to:
These brokers offer you higher maximum lump sums than their standard terms.
They also contain some variations like:
- The Aviva Lifestyle Flexi Plan provides you with a lower interest rate if the maximum amount isn’t required.
- More2Life offers you an enhanced drawdown facility with an increased cash reserve for future use.
- Just Retirement then goes on to serve you a more comprehensive Lifestyle Questionnaire which considers other conditions that most equity release plans do not cite.
How is the Plan Calculated?
The impaired lifetime mortgages plans calculation is dependent on the age of the youngest proprietor and the property’s portfolio. However, if there’s any impairment, then the lender will undertake more calculations to ensure you get the highest amount as per your circumstances.
The platform for calculating the level of impairment is by using the health and lifestyle questionnaire, which will contain direct questions.
Should any of the ‘enquired’ conditions apply, then the broker will offer you the necessary enhanced terms, depending on the severity of your situation and number of illness.
Each plans provider has their criteria as to how they can increase the loan you require or lower the interest rate, but it’s all dependent on the lender’s perceived life expectancy of the proprietor.
To find how much you borrow, be sure to use our calculator, below.
Illness can take a toll on you. However, you can finally see the light at the end of the tunnel. Therefore, you should contact your professional adviser today and get to see how much equity you can release from your home.
For more information on these plans and more though, be sure to click here and see how much equity you can release and contact with an expert without charge.
How Much Can You Release?
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