Enhanced lifetime mortgages

If you’re in poor health and need funds, you might be considering “unlocking” some of the value in your property. One way to do this is through an enhanced lifetime mortgage – here’s what you need to know about these.

What is an enhanced lifetime mortgage?

Also known as an “impaired” lifetime mortgage, an enhanced lifetime mortgage is a form of equity release available to those in poor health who are looking to access more of the equity they own in their home.

How does an enhanced lifetime mortgage work?

An enhanced lifetime mortgage is a specialised type of loan for homeowners with reduced life expectancy. As a result, they’re able to borrow a larger share of the equity they have in their home, and also receive a lower interest rate. The loan amount (along with any interest) is repaid once you sell the property, unless you’ve taken out an enhanced interest-only lifetime mortgage.

Enhanced lifetime mortgages can be offered on either a lump sum or drawdown basis, which means you can either access the full equity amount up front, or unlock parts of your equity as and when you need it.

While most lifetime mortgages are available to those aged 55 or over who own a home that’s worth at least £70,000, the requirements for an enhanced lifetime mortgage may be stricter, and you’ll need to meet specific health-related criteria to be eligible.

What are the pros and cons?

How much do I need to repay each month with an enhanced lifetime mortgage?

This will depend on the type of lifetime mortgage you take out. An enhanced interest-only lifetime mortgage will require you to make monthly interest repayments, whereas a lump sum or drawdown lifetime mortgage has no monthly payments, which means you’ll pay the full amount of interest at the end of the loan.

However, there are some initial costs that you will need to cover when applying for an enhanced lifetime mortgage, including:

• Consulting fee
• Surveyor fee
• Legal fees
• Application fee

What are the best rates for enhanced lifetime mortgages?

Enhanced lifetime mortgages are typically offered with lower interest rates than other types of equity release, with APRs ranging from 2%. However, the specific rate you receive will be based on your personal situation and health record, with the best rates generally offered to those whose life expectancy is most reduced.

Eligibility criteria

Like with other forms of lifetime mortgage, you’ll need to be a homeowner and at least 55 years old to qualify for an enhanced lifetime mortgage. However, enhanced lifetime mortgages also have specific health-related requirements you’ll need to meet to be eligible.

You’ll need to complete a questionnaire to assess your eligibility for an enhanced lifetime mortgage, which is used to determine whether you’re in poor enough health. The questionnaire will cover conditions such as:

• Whether you smoke
• Your body mass index (BMI)
• If you’re on prescription medication
• If you have diabetes
• If you have high blood pressure
• If you retired early due to poor health

How to apply for an enhanced lifetime mortgage scheme

In order to apply for an enhanced lifetime mortgage, you’ll generally need to arrange a meeting with a specialist adviser or broker who can explain your equity release options. Once you’re ready to apply, you’ll first need to complete a health-related questionnaire to determine your eligibility for an enhanced lifetime mortgage, and can request a quote to see how much equity you’ll be able to unlock.

If you’re satisfied with your quote, you can then begin the formal application process.

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Frequently asked questions

• What happens when an enhanced lifetime mortgage ends?

  This will depend on the type of enhanced lifetime mortgage you have, but the loan amount and any outstanding interest will need to be paid when the lifetime mortgage ends. This generally happens when your house is sold, and is deducted from the sale price.

• Can I still obtain an enhanced lifetime mortgage in retirement?

  Yes, you can still apply for an enhanced lifetime mortgage if you’re a pensioner, and may actually have a better chance of being approved thanks to the related health requirements.

• Can I move to a new house with an enhanced lifetime mortgage?

  Yes, you may be able to move house if you have an enhanced lifetime mortgage, but this is something you’ll need to discuss with your broker or lender.