Enhanced Lifetime Mortgages
The enhanced lifetime mortgage often offers homeowners the maximum equity release to which they may be entitled. This maximum equity release is provided through a type of “roll-up” plan which takes into account several factors related to the homeowner’s health and lifestyle. In essence, the enhanced lifetime mortgage can provide a larger equity release to those homeowners who are in poorer health.
An enhanced equity release scheme will use a series of lifestyle questions to help gather information about the homeowner in order to determine if an enhanced lifetime mortgage is available. Once the lender gathers all relevant answers, they are able to underwrite an application based on the conditions and lifestyle choices of the homeowner.
Generally speaking, the more severe the health of the homeowner is, the more likely they are to receive a larger lump sum payment through their enhanced lifetime mortgage. There are no monthly or regular payments required under an enhanced equity release plan. The overall loan amount borrowed is repaid once the home is sold which most often occurs once the homeowner has either passed away or entered into permanent long term care. At that point the funds remaining following repayment of the enhanced lifetime mortgage will pass into the deceased’s estate & distributed in accordance with their wishes.
In order to qualify for an enhanced lifetime mortgage, you must meet certain health conditions. The lender in question will determine how poor your health is and will subsequently assess your health and lifestyle based on actuarial underwriting. For those who are in very poor health, the lender is able to provide a larger lump sum payment because the probability is that the life expectancy of very ill homeowners is far shorter. The premise here being the shorter the life expectancy, the shorter the term & hence less roll-up of interest, resulting in a reduction in risk to the lender of ever having to implement the ‘no-negative equity guarantee’.
Enhanced lifetime mortgage lenders currently available include; Aviva, Just Retirement & more2life. There is also one enhanced home reversion scheme from Crown which works on a similar basis.
There are several illnesses that can be applied toward your eligibility for an enhanced lifetime mortgage. These include:
1. High Blood Pressure
7. Heart Attack
8. Parkinson’s Disease
9. Multiple Sclerosis
All of these conditions and lifestyle choices will be used during the lifestyle questionnaire part of the application process. This will help determine if you qualify for an enhanced lifetime mortgage. The answers to the lifestyle questionnaire could then require verification from the doctor of the applicant concerned. No medical will be required, however some lenders do insist on a tobacco test from a visiting nurse.
If you do qualify, there are several advantages to this specific type of lifetime mortgage scheme:
1. You are able to benefit from a poorer health status
2. You will qualify for a higher lump sum payment than standard roll-up plans
3. You can use the extra cash received to make any necessary modifications to your home
4. You do not have to go through any medical examinations to establish your health status. It can be all self-reported.
5. You are still eligible for a ‘no negative equity guarantee’
Similar to any other financial product, there are some disadvantages to enhanced lifetime mortgages. These include:
1. Interest rates may be higher
2. It may take longer for the application to be processed in this type of plan, as it is often required that you need a doctors report.
3. You may incur early repayment charges or fees
4. Receiving a larger payment may jeopardize your ability to pass on any inheritance to your beneficiaries.