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 give you a definite edge when it comes to these illnesses since it allows you to borrow more cash.
However, without the right information, you can get confused. Lucky for you, this guide will give 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 check the guide on ‘What is a Lifetime Mortgage.’
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What is an Enhanced Lifetime Mortgage?
If you are looking to release the maximum amount of equity from your estate or have your plan provider charge you a potentially lower interest rate, then taking the enhanced lifetime mortgage plan could be your golden key to a happy retirement.
The enhanced lifetime mortgage, 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 plan allows you to unlock more equity based on the answers you give 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.
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 plan 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 plan on either a lump-sum or drawdown basis. Similar to the enhanced annuity plan, the enhanced lifetime mortgage provides you with a favourable lump-sum and the more severe your health record, 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 lifetime 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 for Enhanced Lifetime Mortgages?
Your qualification for the enhanced lifetime mortgage plan depends on your health records. It’s because your plan 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 a straightforward 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 Parkinson’s disease.
- 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 severe health and lifestyle issues, it could mean that your lender will allow you to release a more substantial amount of cash.
The Benefits of Taking Out an Enhanced Lifetime Mortgage
The pros of taking out an enhanced lifetime mortgage plan allows you to enjoy several benefits which include 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 typically 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 scheme is available, enabling you to withdraw funds in stages.
- You don’t require a medical.
- Even after taking the maximum amount of cash, the plan stills safeguards you with the ‘no negative equity guarantee’ scheme.
- The questionnaire you complete is simple and straightforward
The Pitfalls of Taking Out an Enhanced Lifetime Mortgage
Like with any other equity release scheme, there must always be a degree of caution. Some of the facts you need to consider include:
- By unlocking the maximum enhanced equity release, you might leave little or no inheritance.
- The interest rates, in as much as they are minimal, tend to be higher than on conventional lifetime mortgages.
- The plan could take longer to set up if your lender 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 plan earlier than intended.
Which Companies Offer Enhanced Lifetime Mortgage Schemes?
Equity release companies specialising in the impaired lifetime mortgage scheme include, but are not limited to:
These lenders offer you higher maximum lump sums than their standard terms.
They also include some variations like:
- The Aviva Lifestyle Flexi Plan provides you with a lower interest rate if the maximum amount isn’t required.
- More2Life gives you an enhanced drawdown facility with an increased cash reserve for future use.
- Just Retirement then goes on to give you a more comprehensive Lifestyle Questionnaire which considers other conditions that most equity release plans don’t cite.
How is the Enhanced Lifetime Mortgage Plan Calculated?
The ‘impaired’ lifetime mortgage scheme calculation is dependent on the age of the youngest proprietor and the property’s portfolio. However, if there is any impairment, then the lender will undertake more calculations to ensure you get the maximum amount as per your circumstances.
The platform for calculating the level of impairment is by using the health and lifestyle questionnaire, which will include straightforward questions.
Should any of the ‘enquired’ conditions apply, then the lender will offer you the necessary enhanced terms, depending on the severity of your situation and number of illnesses.
Each plan provider has their criteria as to how they can increase the amount of cash you require or lower the interest rate, but it is all dependent on the lender’s perceived life expectancy of the proprietor.
To find how much you borrow, be sure to use our enhanced lifetime mortgage calculator, below.
Illnesses can take a toll on you. However, with the enhanced lifetime mortgage, you can finally see the light at the end of the tunnel. Therefore, ensure you give your professional adviser a call 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 chat with an expert for free.
How much money could you release?
A lifetime mortgage plan allows you to access the value of your home, tax-free without having to sell up, so that you can have money to spend on whatever you want or need.