Enhanced Lifetime Mortgage

The enhanced lifetime mortgage scheme puts equity release underwriting under the microscope by analysing the health & lifestyle of the homeowner. Where poor health can be evidenced, equity release terms can be enhanced by either increasing the maximum lump sum calculation, or reducing interest rates below that offered on standard terms.

Enhanced equity release schemes can therefore actually benefit homeowners with a history of poor health. Also known as ‘impaired’ lifetime mortgages, they work using the same principles applied to ‘enhanced annuities’; by actuarially assessing the potential life expectancy of applicant’s based on their health & lifestyle. Using past underwriting experience, certain providers will use this information to the equity release industry’s benefit.

How Is The Equity Release Enhancement Calculated?

The enhanced lifetime mortgage calculation is based on the age of the youngest homeowner and the valuation of the property. However, if any impairment exists then a further calculation is undertaken. The platform for calculating the level of impairment is the use of a ‘health and lifestyle questionnaire‘. This uses a series of questions surrounding the health of an individual which underwriters use to determine the level of enhancement offered. An enhanced lifetime mortgage calculator will help give an idea of the maximum lump sum available.

The main conditions accounted for are: –

  • Height and weight
  • Smoker – more than 10 cigarettes per day for last 10 years?
  • Heart attack, high blood pressure, angina or stroke
  • Cancer, leukaemia, Hodgkin’s lymphoma, malignant growth or tumour
  • Parkinson’s disease, Dementia including Alzheimer’s
  • Under any medication, or taken early retirement on the grounds of ill-health?

Should any of these conditions apply, then enhanced terms can be offered by the lender, the level of which depends on the severity of the illness. Each provider has their own criteria as to how much the loan can be increased by, or interest rate reduced, all based on the lenders perceived life expectancy of the homeowner.

Which Companies Offer Enhanced Lifetime Mortgages?

Lifetime mortgage companies specialising in enhanced equity release schemes are Aviva, More2Life and Just Retirement. All these companies will offer higher maximum lump sums than their standard terms. There are some variations of this: –

  • Aviva’s Lifestyle Flexi plan will offer a lower interest rate if the maximum amount isn’t required
  • More2Life offer an enhanced drawdown facility offering an increased cash reserve for future use
  • Just Retirement offer a more detailed Lifestyle Questionnaire which uses conditions other plans miss
Confirmation of any impairment will usually be checked by the lender writing to the applicants doctor for a medical report following an application submission. Some equity release lenders may randomly request a nicotine test should a smoking status be indicated on the health and lifestyle questionnaire.

Who Will Benefit from Impaired Equity Release Schemes?

Due to the potential increase in loan size, homeowners who still find maximum lump sum schemes fall short of their requirements, should consider enhancing their plan. Enhancement may provide that extra lump sum needed to clear an existing mortgage, loan or credit card debts. Alternatively, if searching for the lowest interest rate possible, health & lifestyle should also be considered as Aviva may reduced their base interest rate even further.

Information provided regards the enhanced lifetime mortgage scheme. To understand the plan risks and features always ask for a personalised Key Facts Illustration.