Enhanced Lifetime Mortgage

Drawdown  Lump Sum  Voluntary Repayment  Interest Only

Enhanced lifetime mortgage is also known as impaired or ill-health. It is a type of equity release for retirees. There are times in life when you have plenty of assets, but may not have enough cash to live comfortably—for this situation there are equity releases. You are able to tap into the asset you have to gain a tax free lump sum of cash. Lifetime mortgages are only offered to those in retirement and there are different types. Enhanced is just one option. The industry providers try to provide a product that will fit everyone’s needs, thus if one product doesn’t work for you there may be one that has advantages that are of benefit.

The Enhanced Option
Traditional lifetime mortgages offer a one-time lump sum of tax free cash. The amount is determined based on age of the homeowner and property value. Typically the youngest homeowner needs to be at least 55 years of age. Depending on the provider the minimum age can be higher than 55 sometimes 60 or 65. The property value usually needs to be at least £70,000; however providers do have different minimums.

The only difference between enhanced lifetime mortgage and traditional lifetime mortgages is in the lump sum amount offered. The assumption with enhanced equity release is that the homeowner has a health issue that will affect the average person’s life expectancy. The average person age 55 could live up to 100 years of age, although most live to 85 or 90 in current times. For an individual who is ill they may not live to 100, but closer to 75 or 80 depending on their health issue and current age.

The point of the enhanced mortgage is that there is a health issue and lifetime mortgage providers want to ensure the ailing individual has enough funds to live comfortably for what time they do have left. Providers will increase the standard initial lump sum to a higher amount when ill health is involved.

To understand whether you qualify for an enhanced lifetime mortgage, use our free smartER research tool.

Enhanced Lifetime Mortgage Calculator

Advantages
• A higher lump sum
• Repayment of capital and interest is not until death or permanent move to long term care
• The retiree can be more comfortable during retirement

Disadvantages
A higher lump sum means there is less equity left in the home at the end. Inheritance is more difficult to protect when a higher than standard lump sum is provided. If married, the youngest homeowner must be at least 55 and have a health condition. The older spouse or partner can carry the loan through till their death or permanent move, which does mean the interest accrues over a longer period of time.

Despite the disadvantage of inheritance, for many it is about being comfortable in retirement with sufficient cash on hand to live. It is not a mortgage option for everyone as the qualification process requires there to be a type of ill health. The health is checked and assessed based on condition; however, some lifestyle choices such as smoking can also apply. Overall an enhanced lifetime mortgage is for those who really need a larger capital sum than a standard lifetime mortgage can offer.