An enhanced lifetime mortgage is a type of equity release plan designed specifically for UK homeowners aged 55 and over who have certain health or lifestyle conditions.
Unlike standard lifetime mortgages, enhanced lifetime mortgages take these factors into account, potentially allowing you to borrow a larger amount of money or access lower interest rates.
If you have any health issues or lifestyle factors that might affect your life expectancy, an enhanced lifetime mortgage could be a way to unlock more of the value tied up in your home.
Related Articles
Please Note: The content on this page is designed to be a helpful starting point for understanding equity release. It explores the concept, different plan types, and the general process involved. However, equity release is a complex financial decision with significant implications for your long-term financial security. To determine if equity release is the right option for you, it’s essential to consult with a qualified financial adviser who specialises in equity release products.
How Does an Enhanced Lifetime Mortgage Work?
While a standard lifetime mortgage considers your age and property value to determine the amount you can borrow, an enhanced lifetime mortgage (or impaired lifetime mortgage) goes a step further.
It factors in your health and lifestyle to potentially increase the amount of money you can access.
Specific health conditions or lifestyle factors, such as smoking, high blood pressure, or a high body mass index (BMI), can influence your life expectancy.
In the context of an enhanced lifetime mortgage, this can work in your favour.
Lenders may offer you a larger lump sum or a lower interest rate because the loan is expected to be repaid over a shorter period.
Eligibility
To be eligible for an enhanced lifetime mortgage, you generally need to meet the following criteria:
- Age: You must be at least 55 years old.
- Property Ownership: You must own a property in the UK.
- Health and Lifestyle: You must have one or more qualifying health or lifestyle factors.
These can include:
- Smoking
- High body mass index (BMI)
- High blood pressure
- Diabetes
- Certain medical conditions (e.g., heart disease, cancer, stroke)
The assessment process for an enhanced/impaired lifetime mortgage is straightforward.
You’ll be asked to complete a health and lifestyle questionnaire. This questionnaire will ask about your medical history, current health conditions, and lifestyle habits.
Unlike some other financial products, you won’t need to undergo a medical examination to qualify for an enhanced lifetime mortgage.
However, your lender may request confirmation of your health conditions from your GP.
Common Misconceptions
There are a few common misconceptions about eligibility for enhanced lifetime mortgages:
You need to be seriously ill
While serious illnesses can qualify you, even mild conditions or lifestyle factors like smoking can make you eligible.
You need a medical exam
A health questionnaire is usually sufficient, and no medical exam is required.
Equity Release Advice
Award winning service
Equity release experts
FCA Regulated
Let us match you with a fully qualified equity release expert.
Call us on 0330 030 5050
Benefits of Enhanced Lifetime Mortgages
Enhanced lifetime mortgages offer several advantages, particularly for those with health or lifestyle conditions:
Increased Tax-Free Lump Sum: The primary benefit is the potential to access a larger tax-free lump sum than a standard lifetime mortgage. This can provide a significant financial boost for retirement or other needs.
Potentially Lower Interest Rates: Due to the potentially shorter loan term, some lenders offer lower interest rates, reducing the overall cost of borrowing.
Flexibility in Accessing Funds: You can choose to receive the funds as a single lump sum or as smaller amounts over time through a drawdown facility, giving you control over your finances.
Maintaining Homeownership: You retain full ownership of your home and can continue living there for the rest of your life.
No Monthly Repayments: Unlike traditional mortgages, there are no required monthly repayments. The loan is repaid when you pass away or move into long-term care.
No Negative Equity Guarantee: You’ll never owe more than the value of your home, even if house prices fall. This guarantee is a standard feature of all regulated equity release products.
Drawbacks
While enhanced lifetime mortgages offer significant benefits, it’s important to consider the potential drawbacks:
Reduced Inheritance: As the loan and accrued interest are repaid from your estate upon death or moving into long-term care, the amount passed on to your beneficiaries is likely to be reduced because of this.
Slower process: It could be slower to arrange than a standard lifetime mortgage if the lender needs to write to your GP.
Impact on Means-Tested Benefits: Depending on the amount you borrow, equity release could affect your eligibility for certain means-tested benefits. Always seek advice to understand the potential impact on your financial situation.
Early Repayment Charges: If you decide to repay the loan early, you may incur early repayment charges. These can be substantial, so it’s important to consider your long-term plans before proceeding.
Compounding Interest: The interest on the loan will accumulate over time, reducing the equity remaining in your property. While enhanced lifetime mortgages may offer lower interest rates, the compounding effect can still be significant over the long term.
Not Suitable for Everyone: Enhanced lifetime mortgages are not a one-size-fits-all solution. Carefully weigh up the pros and cons and seek professional advice to determine the best option for your individual circumstances.
What Can You Use The Money For?
The funds released from a lifetime mortgage can be used for a variety of purposes, depending on your individual needs and goals. Here are some common uses:
Supplementing Retirement Income: If your pension or savings aren’t enough to cover your desired lifestyle, the extra funds can provide a welcome boost.
Home Improvements or Adaptations: Whether it’s a new kitchen, a loft conversion, or modifications to make your home more accessible, the money can help you create a more comfortable and enjoyable living space.
Debt Consolidation: Outstanding debts with high interest rates can be consolidated and repaid.
Gifting to Family: You might choose to share some of the wealth with your loved ones, helping them with a deposit for a house, paying off student loans, or simply giving them a financial head start.
Holidays and Travel: The extra funds can allow you to explore new destinations, embark on dream holidays, or simply enjoy more leisure time.
Medical Expenses or Care Costs: If you have ongoing medical needs or anticipate needing care in the future, the funds can help cover these costs.
You will find more useful information in our article: What can you use equity release for?
How to Get an Enhanced Lifetime Mortgage
Given the complexities and long-term implications of equity release, all borrowers must receive professional advice before being able to apply for an enhanced lifetime mortgage.
A qualified adviser will help you understand the intricacies of the product, assess your eligibility, and guide you through the entire process.
Not all mortgage brokers or advisers can help with equity release. They need to hold a specific equity release qualification.
Let Respect Mortgages help you take the next step.
We can match you to an award winning equity release specialist, with over 25 years experience helping people just like you.
Importantly they’re also members of the Equity Release Council.
Please call us on 0330 030 5050 for more details.
Alternatives
While enhanced lifetime mortgages offer a unique solution for those with health or lifestyle considerations, they aren’t the only option for accessing your home’s equity.
Downsizing to a smaller, less expensive home is another avenue to explore, potentially freeing up a significant amount of capital.
For those comfortable with making monthly repayments, a retirement interest-only mortgage (RIO) could be a viable alternative. This type of mortgage allows you to borrow against your home with only interest payments due each month, keeping the initial loan amount intact.
The equity release market offers a variety of other products as well. It’s worth exploring options like home reversion plans, which involve selling a portion of your home in exchange for a lump sum or regular income.
Read more: Alternatives to equity release
the Equity Release Council
The Equity Release Council (ERC) is a group that sets rules to keep you safe. Choosing a company that is a member of the ERC gives you extra security and confidence in your decision.
Learn more about what the Equity Release Council does and why it’s important.
Enhanced lifetime mortgages present a unique opportunity for UK homeowners aged 55 and over with health or lifestyle conditions to access a larger portion of their home’s equity.
While they offer significant advantages like increased borrowing potential and potentially lower interest rates, it’s important to weigh these benefits against the potential drawbacks, such as reduced inheritance and the impact on means-tested benefits.
If you’re considering equity release and believe you might be eligible for an enhanced lifetime mortgage, it’s essential to seek expert advice from a qualified financial adviser.
Remember, your home is a valuable asset, and equity release is a significant financial decision.
We can help you find a whole-of-market equity release specialist.
FREE matching service
Call us on
0330 030 5050
It depends on your age, your property’s value, and sometimes your health. Generally, older homeowners can release a higher percentage of their home’s value (up to around 55%).
Yes you can buy a house with a lifetime mortgage.
A lot of people question if you can move house using a lifetime mortgage and they do offer a potential solution tailored specifically for homeowners aged 55 and over.
Learn more: Buying a house with a lifetime mortgage
You have complete freedom to use the money however you wish – boosting retirement income, making home improvements, helping family, or anything else that makes your life better.
Read more: What can you use equity release for?
The loan, along with accumulated interest, is typically repaid after you pass away or move permanently into long-term care. Your home is sold, and the proceeds are used to settle the debt.
Read more: How is equity release paid back?
Unlocking cash from your home while still living there. This can significantly boost your financial comfort and freedom in retirement.
The interest on your loan grows over time, reducing the inheritance you leave to your loved ones.
The UK has strict regulations. The Financial Conduct Authority (FCA) oversees providers, and the Equity Release Council (ERC) sets additional standards. Look for providers who are members of BOTH.
You usually need to be at least 55 years old and own your home. Certain property types, like new builds or flats, might be excluded.
Read more: Am I Eligible for Equity Release?
With a lifetime mortgage, you retain full ownership of your home and the potential to leave an inheritance. Home reversion plans involve selling a portion of your home to a company.
Yes, they are much more common than home reversion plans. This is mainly due to retaining ownership and the possibility of leaving a larger inheritance.
Some plans offer this flexibility! You can either make optional payments or select a plan that specifically allows for interest payments.
Lifetime mortgages approved by the Equity Release Council will have the ability to port or transfer the plan over to a new property. This is not guaranteed though.
Whether you are able to do this depends on the property type and value that you wish to move to.
Read more: Can equity release be transferred to another property?
No, the funds from a lifetime mortgage are considered tax-free.
Read more: Do you have to pay tax on equity release?
No. Equity Release Council members guarantee your right to stay in your home for life unless you move into long-term care. The only time your home would be sold is after these events.
It is possible to use equity release to release cash from your home more than once. But you can’t have two lifetime mortgages, at the same time, on the same property.
Read more: Can you do equity release more than once?
It’s OK if you still have a mortgage. One of the most important things to know is that if you take out equity release, your existing mortgage has to be paid off.
A portion of the money you receive is automatically used to pay off your old mortgage. Any leftover funds then come to you as a lump sum or in regular payments – it depends on the type of plan you choose.
Read more: Can you get equity release if you still have a mortgage?
Also in this section
Equity Release Hub
Equity Release
Alternatives to equity release
Am I Eligible for Equity Release?
Benefits of Equity Release
Equity Release & Joint Ownership
Equity Release Council
Equity Release Guide
How Does Equity Release Work?
How is
This post first appeared on Respect Mortgages - Be In The Know, please read the originial post: here
