- February 22, 2018
An enhanced lifetime mortgage offers several unique benefits to those retirees who qualify. This is a very specialized lifetime mortgage product that often offers a lower interest rate and/or a higher equity release amount.
An enhanced lifetime mortgage can be referred to using other names as well, including impaired lifetime mortgage or ill-health lifetime mortgages. Their name suggests their purpose, which is to provide an equity release scheme to those retirees who have health or lifestyle issues that will likely shorten their life expectancy. In fact, the shorter your life expectancy, or the worse your health, the more equity you’ll likely be able to release.
How do I qualify for an enhanced lifetime mortgage?
Not everyone will qualify for an enhanced lifetime mortgage and the determination as to whether or not you qualify will be largely based on your answers to a health and lifestyle questionnaire.
The questionnaire is used to determine if your health conditions or lifestyle choices are likely to contribute to a shorter life expectancy. The questionnaire will factor in your body mass index and whether you smoke. It will also take into account if you currently have, or have recently had high blood pressure, diabetes, angina, Parkinson’s disease, multiple sclerosis, heart attack, cancer, or stroke. Other considerations include if you were forced to retire due to poor health or if you regularly take prescription medicine.
How much can I borrow?
If you qualify for an enhanced lifetime mortgage, the amount you receive will be based on the youngest homeowner’s age and the value of your property. If you also have a qualifying health condition, another calculation will be done.
The level of your health condition will be determined using the questionnaire you will have filled out. If your conditions qualify you for an enhanced lifetime mortgage, the lender can offer you new terms, depending on the severity of your condition(s).
The amount you receive and under what terms will vary by equity release provider, as they all follow their own criteria. In general, an enhanced lifetime mortgage will give you a lower interest rate, or a high equity release amount. The amount for which you are approved will be based on your assumed life expectancy.
There are many unique benefits to an enhanced lifetime mortgage such as the following:
• Potential for enhanced terms such as lower interest rate or bigger lump sum
• Potential for drawdown terms, which means you could withdraw more in the future, if needed.
• Beneficial to have poor health
• Not subjected to a medical exam
• ‘No negative equity guarantee’ is still available
• Questionnaire is very easy to understand and fill out
Like all products, there are some potential drawbacks to taking out an enhanced lifetime mortgage. Some of these considerations are the following:
• Potentially negative repercussions for leaving behind an inheritance
• Interest rate may be higher than a standard lifetime mortgage, depending on the provider
• May be an impact to any means-tested benefits being received
• Setup can be longer than with a standard plan, since verification may be needed by a physician
Where can I get an enhanced lifetime mortgage?
Not every equity release provider offers enhanced lifetime mortgages. In fact, the options are quite limited. More2Life, Just Retirement, and Aviva all do provide them and each of them offers a higher maximum lump sum than they do with their standard product. That said, each offers the product on a different set of terms:
• More2Life provides an enhanced drawdown facility so that you can withdraw funds in the future, if needed.
• Aviva offers a lower interest rate if you don’t take the maximum amount you’re allowed
• Just Retirement takes into account lifetime choices and health issues that the other providers do not. So, this might be an option if your conditions are not one of the most common qualifying issues.
With each of these providers, you will likely need to verify your conditions, which can usually be done with a medical report from your physician. If you’re applying for an enhanced lifetime mortgage on the basis of being a smoker, or if you marked off that you were a smoker on the questionnaire, there is a good chance you will need to take a nicotine test to confirm your status as a smoker.
There is no medical examination required with any of these plans. The medical report will serve as your confirmation.
If an enhanced lifetime mortgage sounds like a good fit for your situation, we advise you to reach out to one of our equity release advisers to walk you through the process of applying. There is additional paperwork needed with this type of scheme and we can guide you through the application process.