There are a variety of options available to retirees who are looking for a unique way to release equity from their homes. In fact, nearly any equity release scheme can be tailored to match individualized needs and circumstances. Therefore, the flexibility of lifetime mortgage schemes has proven adaptable to nearly any circumstance or situation.
Fairly new to the equity release market is the enhanced lifetime mortgage, also known as the impaired lifetime mortgage. These equity release schemes are geared toward those retirees who suffer from ill-health and are often referred to as ill-health equity release schemes. These plans function as a roll-up mortgage and can include criteria based on medical history and current health conditions. Those health conditions can help ensure that the consumer gets the maximum equity release available if that is the pre-requisite.
The enhanced lifetime mortgage functions similarly to an enhanced annuity, as it often offers a larger up-front lump sum based on answers to a health & lifestyle questionnaire. This sum gets larger as the severity of health conditions and ailments increases. The whole basis for this particular mortgage is estimated life expectancy. The shorter it is expected that the consumer will live, the larger the lump sum they can expect to receive. There is an enhanced lifetime mortgage calculator that is used to take into account health conditions and lifestyle choices of each applicant. Using mortality tables, the underwriters assess the severity of the conditions, also taking account age as well as the answers given to a variety of different health questions. Then, the amount the lender is able to provide is calculated.
Impaired lifetime mortgages can be provided on either a drawdown basis or a roll-up basis. The equity is released to the consumer and there are no monthly payments required. The cash that is released is done so tax-free and can be used for whatever purposes the consumer deems appropriate. The cash comes with a fixed rate of interest for its lifetime and it compounds over the course of the loan. In order to pay back the loan, the house is sold. This typically takes place when the last person in the home has passed away or has moved into permanent long term care. Any balance left from the sale of the property is returned the estate.
There is a pretty standard criterion in place that needs to be met in order to qualify for an ill-health equity release scheme. The qualifications are as follows, though they may differ slightly by lender:
– Minimum of 55 years old
– No upper age limit
– Minimum property valuation of at least £70,000
– May be some location restrictions e.g. Northern Ireland
– Minimum release required is usually £10,000
Upon application, the homeowners will typically be confronted by a medical and health questionnaire. This questionnaire may differ slightly between lenders but each series of questions includes much of the same information. Typically, this questionnaire will include information on weight and height, lifestyle choices such as smoking and drinking, medical history including high blood pressure, heart conditions and diabetes. It may also include any previous diagnoses related to cancer, multiple sclerosis, or Parkinson’s disease. It may also include a list of any current prescription medications. The more conditions that are checked off during the questionnaire, the greater the enhancement that will be placed on the lifetime mortgage. This essentially means that the sicker the individual, the greater the lump sum they can expect.
Deciding on a lifetime mortgage can be a big decision. The loan, and its accrued interest, does need to be repaid and taking out a lifetime mortgage can have repercussions on potential inheritances. Similar to any other financial transaction, there are both advantages and disadvantages when it comes to taking out a lifetime mortgage and these all need to be weighed out and given sufficient consideration. However, for those who are suffering from ill-health, the enhanced lifetime mortgage can be used to ensure that the maximum equity release possible is received to fulfil life’s dreams