Enhanced lifetime mortgage is also known by two other names. Some providers may refer to this equity release scheme as an impaired or ill-health lifetime mortgage. Despite the different nomenclature used, on occasion all products under this category have one main difference from standard lump sum mortgages. It is this variance in loan option that sets it apart and makes it work for some homeowners and not others.
How Enhanced Lifetime Mortgage Schemes Works
A standard lump sum equity release is based on age and property value. Loans may be available as early as age 55 for homeowners; where the youngest homeowner must meet the age qualification of the lifetime mortgage provider. In terms of property value, there are minimums set up by each provider. As long as the minimum value is met, a homeowner can receive a loan based on the loan to value percentage.
The loan to value percentage in the case of lifetime mortgages is a calculation of life expectancy based on typical or average lifespans for adults and the current property value. No mortgage will be given for 100% of the equity in the home; and based on age one may not receive more than 20% of the home value as the lump sum. The older an individual is the more funds are released due to the lower life expectancy. A homeowner who is younger would accrue more interest on the capital sum, at least that is the theory.
Typically, a lifetime mortgage with current interest rates will double in 10 to 12 years, which is why the provider has to calculate age, property value and life expectancy to account for the interest accrual. It is possible for the interest plus lump sum to be the full value of the home.
The enhanced version works on the premise that poor health is a good thing. While one does not like to examine the cold reality of dying, certain health conditions or lifestyle choices can reduce the average life expectancy of an individual whereby the homeowner can repay the lifetime mortgage earlier than a healthy person.
Under this assumption, providers are willing to offer an enhanced sum, over the standard sum usually offered for a healthy person of the same age.
• It is a lifetime mortgage with repayment required at death or move to long term care
• No repayment is made during life
• The lump sum provided is an enhanced amount over other products
• Ill health is helpful to obtain this loan
• The sum is larger so interest accrues at a quicker rate
• One must have ill health and be the youngest homeowner on the title of the property
The enhanced version of lifetime mortgages is really only disadvantageous for an individual who does not have ill health or is worried about the inheritance they will leave behind. For most who have a health condition, it is helpful to access funds they need to live a happy, comfortable life until the end. It is a specialist lifetime mortgage and it is not for all homeowners.
Require further information?
Use the form below to request further information about this, or any other scheme, and an FCA regulated independent equity release adviser will be able to assist you over the phone, face-to-face, or via email.