Ill-Health Lifetime Mortgage
Ill-health lifetime mortgages aka enhanced or impaired health mortgages are all about your health and lifestyle. Being in poor health can certainly compromise your retirement living standards. In fact, being in poor health rarely provides a benefit. Typically you feel rundown, a sour stomach, sore throat, or worse depending on the illness. There are a host of things you might wish to do before your ill health takes hold and the enhanced or impaired lifetime mortgages may provide some salvation.
An In-depth Look at Ill-Health Schemes
The main benefit of enhanced lifetime mortgages is receiving a maximum lump sum of cash tax free to be used as you wish. This is the only loan that offers such high maximum equity releases. Regular roll-up lifetime mortgages will use a standard calculation of life expectancy and create a maximum sum based on average life expectancy. The enhanced lifetime mortgage will use the equity release calculator to its maximum loan-to-values.
The equity release calculation works the same way for ill-health as someone in good health; however, life expectancy is considered lower than the average healthy person. For this reason companies feel more comfortable releasing a higher loan-to-value percentage of home equity to the property owner. The Financial Conduct Authority (FCA) and Equity Release Council have a code of conduct that states these mortgages can never have a negative equity situation. It is outside of regulations for a company to create a loan in which the capital sum plus compounding interest reaches more than the house value. This protection is what limits the maximum lump sum released.
Ill health equity release schemes have minimum release amounts starting at £10,000. Some companies are known to start this at £15,000. The maximum is based on the home property value.
Repayment of impaired health equity release schemes occurs at death or when the homeowner moves to a residential care facility. There are no monthly payments required.
Qualifying parameters for plans
Three qualifications make up the lending process for ill health lifetime mortgage schemes:
• Age
• Health
• Property Value
The minimum age a homeowner must be is 55. There are certain lenders requiring a minimum age of 60. This is the age of the youngest homeowner hi would be signing the loan paperwork. Joint applicants are still required to have one person at least 55 years of age.
It is the youngest homeowner who needs to qualify for the enhanced benefit. Their health and lifestyle is assessed through a questionnaire. The questionnaire examines all possible health conditions or probable conditions such as those from smoking and obesity, cancer, heart failure, diabetes, and a slew of other health conditions qualify for the enhanced lump sum. However, these ailments can be as small as being on prescription medication. So do not rule out qualification if you feel your illness is not severe enough to qualify. Check with one of our equity release advisers first.
Both the age and health condition are used to establish life expectancy based on an algorithmic chart. A company will look at the chart for age and health condition then property value to see the loan to value percentage that should be awarded and then start to examine if there is a potential for even more cash to be released.
For property value, a home must be at least £60,000; however, many companies require a minimum of £70,000. The more equity in a home, the more funds can be released. Certain companies also have maximum home values based on a maximum loan amount.
For a definitive answer on whether you qualify for equity release, use our free smartER research tool. This will take your personal criteria into consideration before presenting products that you’re eligible for. Their rates, along with the maximum release figures for each.
Enhanced lifetime mortgage calculator
Inheritance protection and incentives
The loan is not built to have monthly repayment schemes; however, there are certain incentives and lending companies who are willing to allow a slow repayment of the loan should the homeowner feel comfortable. Flexible repayment options from companies such as Aviva may allow 10% per annum of the interest and capital sum to be repaid without penalty. Of course, homeowners can stay with no monthly repayment if they wish as these are classed as voluntary repayments.
Incentives also include such options as free valuations and cash back. When it comes to the repayment incentives this may be a good idea for homeowners wishing to leave behind an inheritance. It is easy for interest to compound onto a lifetime loan and use up all the inheritance the house has. There are inheritance protection clauses homeowners can add to their loan if they wish. In either scenario it is possible to leave some funds behind depending on how you structure the ill health lifetime mortgage. The rule of thumb is to only withdraw as much equity that you need, & no more.