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Enhanced Lifetime Mortgages

If you’re a retired homeowner, a lifetime mortgage can help you release equity from a fully paid-up property. Enhanced lifetime mortgage schemes use underwriters to approve their loans. These mortgages may, therefore, appeal to homeowners with possible health conditions, looking for a method of maximising the funds tied-up in their home.  

Read on to find out more about how these mortgages work.

What is An Enhanced Lifetime Mortgage?

Like with a lifetime mortgage, these are designed to extract built-up equity in your home, so you can use the money you have already paid into your mortgage to boost your retirement income. You also reserve the right to live in your property, rent free, for life.

The loan is then repaid with the sale of your home when both you and your partner dies or moves into long-term care.

What makes enhanced lifetime mortgages different is that they are specifically designed for those facing health problems in retirement. People who would really benefit from getting the maximum amount of equity released from their home to enhance their quality of life. These mortgages are assessed on a case-by-case basis, by underwriters.

If you would like to find out more about other equity release schemes, take a look at our guide.

Am I Eligible for an Enhanced Lifetime Mortgage?

• These mortgages are designed specifically for those with health problems in later life. Therefore, you must answer some questions about your health and lifestyle before you will be considered. You may also need to be examined by a medical professional.
• In many cases, you may need to be over the age of 55 and be a homeowner in the UK.
• Your home should be worth more than £75,000 and you will have paid off all, if not most, of your mortgage. Any outstanding mortgage will need to be paid off as a priority, upon your acceptance of an enhanced lifetime mortgage scheme.  

How is an Enhanced Lifetime Mortgage Repaid?

An enhanced lifetime mortgage is repaid upon the death of all named homeowners, or when they move out of the home, and into permeant care. The house will then be sold within a year, by your will beneficiaries. They will then organise for the sale proceeds to go back towards paying off the loan provider. Any leftover funds from the sale proceeds will then go to your beneficiaries.

Let’s Look at an Enhanced Lifetime Mortgage Example:

Amana and her husband Harry are looking at enhanced mortgage options, as they would like to keep their home for Amanda. Sadly, Harry will be moving to a nursing home, in the not-so-distant future, as he has recently been diagnosed with Alzheimer’s.

They would like to release £60,000 in order to pay off the rest of their mortgage and meet some of the costs of Harry’s care.

If they had gone for a conventional lifetime mortgage, the maximum amount they could have borrowed would have been £49,000. From approaching an enhanced lifetime mortgage provider and submitting Harry’s doctor’s records, they can now release £70,000.

What are the Benefits of an Enhanced Lifetime Mortgage?

• Higher Borrowing – As these mortgages are designed for those with health problems, the maximum amount you can borrow will often be higher than other lifetime mortgage options. This is because the lender sees the customer as less of a risk, in terms of investment. Namely, they believe the customer may not live for a long time after taking out the mortgage.
• Lower Interest Rates – As these mortgages are for people with medical conditions, lenders can offer lower interest rates with these special, enhanced plans. However, it is worth noting that interest rates on lifetime mortgages are generally higher than other mortgage types.
• Enhanced Drawdown Facility – Some of these mortgages can also offer the customer the opportunity to draw-down more funds than with a non-enhanced lifetime mortgage.

What are the Pitfalls of an Enhanced Lifetime Mortgage?

• Compounding Interest – As these mortgages don’t have to be repaid, in full, until the end of the term, plus the enhanced capacity for borrowing, it is likely that the interest charged will be higher than with other lifetime mortgage types.
• Fees – With enhanced drawdown plans, many providers will ask for a fee when additional funds are withdrawn.
• Slower Application Process – As there are medical reports to be taken into account, the application process may take longer than a conventional lifetime mortgage application.
• Reduced Inheritance – Enhanced Lifetime mortgages are often charged at higher interest. Therefore, the amount your family stands to inherit at the end of the term can be a lot less.
• Benefits Entitlement – You may lose your entitlement to means-tested benefits. A reputable advisor will inform you of these possible changes, before you sign up.

What are the Alternatives to an Enhanced Lifetime Mortgage?

• Downsize – Provided you are still able to move home, selling your house and buying a smaller one could free up some funds for ongoing care.
• State Benefits – Make sure that you are claiming for all of the state benefits you are eligible for, as it may supplement your retirement income. You can check your eligibility at your local Citizen’s Advice Bureau.
• Home Reversion Plan – You could choose to sell shares in your home, as part of a Home Reversion Plan.
• Interest Only Lifetime Mortgage – If you are concerned about rising interest owed, you could look into interest only lifetime mortgage options. These plans let you pay back the interest owed, to maintain your inheritance sum for your loved ones.

If you would like to find some more frequently asked questions about equity release, take a look at this article.

Enhanced lifetime mortgages are a risky financial product and one that you should take specialised financial advice for, before making an application.

To get the process started, talk to an independent equity release advisor, they can offer you a free, no-obligation quote.