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Enhanced lifetime mortgages

Applying for a mortgage can be a long, stressful and overwhelming process, even more so if you suffer from a medical condition. Now, this may sound a little out there, but your medical condition may actually help you when applying for a mortgage. Generally, when you want to apply for a mortgage, your bank or lender looks at certain criteria’s.

Employment, credit score and debit-to-income-ratio are usually the focus of a regular mortgage.

However, an enhanced lifetime mortgage or “impaired lifetime mortgage is designed for those who suffer from a medical condition. In other words, your personal health is what determines how much you will be allowed to borrow. More specifically, the more of an “impaired” lifestyle you have, the more you may be able to borrow.

Enhanced Lifetime Mortgage In Depth

By design, equity release providers a more generous with their lending because the life expectancy of the client is lower. However, because the borrowing amount tends to be higher, this allows more money to go into your health care costs, which makes it all a little bittersweet. An enhanced lifetime mortgage helps you to improve the quality of life when you reach retirement.

The equity you have already generated in your home can be extracted. That means that the money you have already spent on your mortgage can increase your retirement income.

If the homeowner then moves into a care home or passes on, then the loan provider or will beneficiaries can put the property on the market. Once it is sold, the proceeds of the sale will be used to pay off the remaining balance of the mortgage. If any money is left over, then it will go to the named beneficiaries. Often, an enhanced lifetime mortgage is looked at case-by-case, to see if you fit the criteria and are eligible.

Am I Eligible?

An enhanced lifetime mortgage is based on specific terms – those who are likely to suffer adverse health problems in retirement. Therefore, in order to be considered, you will be required to answer questions about your health and overall lifestyle. You should keep in mind that you may be asked to show your medical records. Some loan providers may ask for a medical report from your GP.

Loan providers will ask you to fill out a health questionnaire. Some questions asked will include:

  • Whether or not you are a smoker. If so, how long, how many a day etc
  • Your Body Mass Index (BMI)
  • If you suffer from any Chronic Illnesses (Parkinson’s disease, high blood pressure, cancer, diabetes etc.
  • Prescription medication
  • Went into early retirement due to ill health

Those mentioned above are by no means the only health issues you will be asked about. This is merely just to give you an idea of what the questionnaire will consist of. This is also why enhanced lifetime mortgages are looked at case-by-case, because some may have more severe health issues than others.

Health factors aside, there are other eligibility requirements lenders look at. Generally, you need to be 55 or over to qualify and own at least one home in the UK. The property you own must be valued at over £75,000 and have paid off the all, or the majority of your mortgage.

How Can I Enhanced Lifetime Mortgage Be Beneficial To Me?

Although you are taking out a mortgage based on your health, there are some advantages.

1. Generous Lending

Because these mortgages are based largely on your health, from a lenders perspective, it is less of a risk. To put it more bluntly, lenders consider the option that the client may not live long. On the plus side, larger lump sums are given.

2. No Negative Equity

Regardless of the amount you borrow, the plan safeguards you with a “no negative equity” guarantee.

3. Lower Interest Rates

Lenders tend to offer a lower interest rate with these plans due to the fact that these schemes are in place for people with poor health.

4. Enhanced Drawdown Option

Depending on your lending provider, there is an enhanced drawdown option. This option allows you to withdraw funds in stages.

5. Home Modifications

If your health issues affect your mobility, released funds can help you make modifications to your home, improving your daily life.

6. Simple Questionnaire

Talking about your medical issues can be a sensitive subject and may feel intrusive but, it is necessary. The health and lifestyle questionnaire has been designed with that in mind. It is simple and straightforward.

The Downside of Enhanced Lifetime Mortgage

1. High Compound Interest

The interest on this mortgage tends to be higher than other lifetime mortgages. This is because the enhanced lifetime mortgage does not have to be repaid in full until the end of the term.

2. Slow Application Process

The application process tends to be a little slower because of medical records and reports that have to be taken into account.

3. Additional Fees and Penalties

If you choose the enhanced drawdown option, some lenders may charge a fee in order for funds to be withdrawn. Also, if you decide you want to settle your repayment earlier than planned, you maybe face some penalty charges.

4. Less Inheritance

Enhanced lifetime mortgages come with higher interest rates. As a result, once the term comes to an end, your family or will beneficiaries may inherit a lot less.

5. Reduced Benefit Entitlement

If you take an enhanced lifetime mortgage, you may lose some means-tested benefits. Thus, it is highly recommended that you talk to an expert advisor before you take any action.

Enhanced Lifetime Mortgage Alternatives

1. Interest Only Lifetime Mortgage

If high-interest rates and the reduction of inheritance is a cause of concern for you, then an interest-only lifetime mortgage may be a good option. With such plans, you only pay back the interest you owe. By doing this, you can then free up some money and keep it for inheritance.

2. State Benefits

Are you receiving state benefits? If you are, make sure you are receiving all the benefits you are entitled to. Ask at your local Citizens Advice Bureau what other benefits you may be eligible for. This can be another way to help you supplement your retirement.

Downsize Your Home

If your health permits and you are able to sell and buy a smaller home, then downsizing may be an option worth considering. By downsizing to a smaller home, you will have a smaller space to maintain, which is better if you have poor health. Additionally, downsizing will also free up funds, which you could put towards your healthcare and inheritance.

Which Lenders Offer Enhanced Lifetime Mortgage Plans?

The leading lenders of enhanced lifetime mortgages are Just2life, More and Aviva. They specialise in enhanced lifetime mortgages, so they are a good place to start.

Of course, you are not restricted to only these companies. Better yet, you can compare the enhanced lifetime mortgage providers from an enhanced equity release website like Equity Release Warehouse. It is important to highlight that each quotation is dependent on your individual health issues. You will be required to submit some information and asked a set of questions on the website.

After which, the enhanced equity release calculator will see if you qualify or not. Once you do qualify, you will be able to see the maximum amount you are eligible to borrow through various plans.

If you would like more information about how much equity you may be able to release, including features and benefits, feel free to contact Home Equity Warehouse. Our team of highly trained and friendly staff will be more than happy to answer your questions. Once you receive a quotation, you are under no obligation to proceed and take any further action.

The Rise Of Equity Release

Equity release is becoming more and more popular, but why? Well, if you don’t wish to downsize or move, it is a convenient way to get the money you need for a better and happier retirement. Other major reasons why it is growing in popularity include, the money that is released to you is tax-free, there are no monthly repayments, and you reserve the right to still own your home.

The Bottom Line

Enhanced lifetime mortgages come with a few good perks. However, as with anything, they do carry a financial risk. Dealing with any type of illness is stressful in itself, added financial pressure can burden you further. An enhanced lifetime mortgage can lift an immense amount of financial pressure off your shoulder, allowing you to better focus on your health.

This type of mortgage can free up some money to help you make some home modifications, pay off an existing mortgage, and help you cover the costs of your health care.

Contact Us For More Information

If you are interested in applying for the enhanced lifetime mortgage, do not hesitate to contact us for more information. Our experts will be able to guide you through the entire process and list out all the benefits, features and risks. At Equity Release Warehouse, we can help you decide which equity release is best suited for you. We make it easier for you to be able to enjoy the retirement you deserve.

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To Provide Friendly, Efficient Advice For The Life Of Your Mortgage.

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