Enhanced lifetime mortgage: Everything you need to know

An enhanced lifetime mortgage is the best equity release plan if you’d like to maximise how much you can borrow. Here, we’ve delved into how it works, the benefits and help you decide whether it’s the right product for you.

What is an enhanced lifetime mortgage?

An enhanced lifetime mortgage is an equity release product that gives you access to more funds compared with other standard lifetime mortgages. The amount you can release, however, depends on your health. Typically, the worse your health is, the more you can borrow.

The lender will take into account your health and the value of your property, unlike other plans where age and property value are the main driving factors.

The lender will take into account your health and the value of your property, unlike other plans where age and property value are the main driving factors. Your eligibility for this type of plan will depend on your medical history, which the mortgage lender will check.

Questions asked are almost similar to those of a life insurance plan, including:

• Do you smoke?
• Do you have pre-existing health conditions (such as diabetes)
• What’s your BMI?
• Are you on any medication?

The lender will consider the value of your property and your age, after which they will enhance the amount you can borrow depending on your health questionnaire answers. To qualify for a typical lifetime mortgage, you need to be at least 55 years old and have a property value of at least £70,000.

What are the benefits of an enhanced lifetime mortgage?

If you’re at retirement age and you’re suffering from a critical illness, or you’re in poor health, you shouldn’t have to worry about money. An enhanced lifetime mortgage can give you access to extra funds to cover medical expenses and other costs.

Here’s an overview of the main benefits of enhanced lifetime mortgages:

• You can access more funds than a typical lifetime mortgage plan.
• You won’t have to worry about money if you’re in poor health and retired.
• Lenders won’t need you to undergo a medical examination.
• You can opt for a drawdown enhanced plan that gives you access to funds over time instead of one lump sum. This can make it easier to manage your cash and make payments.

How much can you borrow through an enhanced plan?

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The amount available to you will depend on your property’s value, age, and health condition. The best way to get an exact quote is to use a comparison engine online to get quotes from various lenders.

To give you a better idea of the costs involved, we’ve put together an example quote:

• A 55-year old applicant with a property valued at £150,000 could borrow £65,500 at 5.60% through an enhanced plan. By comparison, the maximum the same applicant could release without the enhanced plan would be £44,250 at 6.60%. The lowest rate would be £17,150 at 2.93%.

Note that your rates will likely be different, and the amount available to you will depend on the value of your property.

What should you consider before deciding on an enhanced lifetime mortgage?

There are plenty of advantages to taking out an enhanced lifetime mortgage. It gives applicants with poor health access to funds without the need for a medical. However, there are also some factors that you should take into account before making a decision.

• Since you’re releasing the maximum value against your property, the amount you leave behind as an inheritance will be a lot lower.
• You’ll find that interest rates are higher than on standard plans.
• Your mortgage cost will increase due to interest roll-up.

It’s always best to discuss the plan thoroughly with an advisor before going ahead.

Can you get an enhanced lifetime mortgage if you still have a standard mortgage?

You might be wondering if an enhanced lifetime mortgage is available to you if you still have an outstanding balance to pay on your standard mortgage. The good news is that, yes, you can apply and get approval. However, the lender will use part of the funds you release from the lifetime mortgage plan to clear your existing mortgage.

So, if you still have a considerable amount left to pay, it could leave you with a much lower lump sum of cash. So it’s best to consider all your options before deciding whether a lifetime mortgage is the right loan tool for you.

Can you cancel your enhanced lifetime mortgage plan?

There are situations where your circumstances change, and you need to exit the lifetime mortgage plan early. If this is the case, you can leave your plan before it runs its course. However, the lender will charge you an early repayment fee. You should consider the cost of the fee before deciding since it might not be worth your while to exit your plan.

How can you get a good deal on your enhanced lifetime mortgage?

Like taking out a standard mortgage for your property, getting the best rates is all down to research and perseverance. It would help if you used a reputable broker to search the market for good deals and use a comparison engine to show you rates from different lenders.

Make sure you don’t opt for the first rate offer and compare multiple providers before choosing one.

Is an enhanced lifetime mortgage plan right for you?

If you’re in poor health, an enhanced lifetime mortgage can be used as a tool to ensure that you can meet your retirement expenses. This is especially true if you have expensive hospital fees and medication to pay for due to your poor health. An enhanced lifetime mortgage can give you peace of mind and act as a layer of protection during the last period of your life.

On the other hand, if you aren’t in poor health but you’re looking to access the level of funds available through an enhanced plan, you probably won’t be approved. You must meet certain health conditions to be eligible for the plan.