Tag Archives: Tax Free Lump Sum

What is an Enhanced Lifetime Mortgage?

An equity release scheme is a way to release some of the cash value of a property, either in instalments or as a lump sum, without having to sell the property and a lifetime mortgage is just one type of equity release scheme. An enhanced lifetime mortgage scheme is a type of lifetime mortgage equity release scheme designed for applicants over the age of 55 years, who have suffered or are still suffering from certain illnesses or impairments.

The standard amount that can be released or borrowed on any equity release scheme depends on a number of different criteria; such as the valuation of the property and the age of the applicant. An enhanced lifetime mortgage goes one step further. In the case of enhanced lifetime mortgage schemes, the amount that can be released or borrowed still depends on age and property valuation, but additionally the severity of the applicant’s health condition is taken into account.

An enhanced lifetime mortgage is designed for those suffering from illnesses or conditions that are likely to reduce their life expectancy. A shorter life expectancy allows lenders to offer more of a tax free lump sum. So, like enhanced annuities, all enhanced lifetime mortgage equity release schemes, allow those with certain health conditions to optimise their assets and get the most out of them to support their retirement plans.

To apply for an enhanced lifetime mortgage scheme, the applicant must complete a lifestyle questionnaire which asks health related questions that allow the lender to assess the applicant’s case.

Some examples of these health related questions are: –

  • What is your height and weight?
  • Have you smoked more than 10 cigarettes per day for the last 10 years?
  • Have you been diagnosed with high blood pressure, requiring medication?
  • Do you suffer from diabetes, requiring insulin or tablets?
  • Have you suffered from a heart attack, stroke or angina?
  • Have you been diagnosed with cancer requiring treatment?
  • Have you been diagnosed with Parkinson’s disease or multiple sclerosis?
  • Are you taking prescription medication or retired on the grounds of ill-health?

By qualifying for just one of these illnesses alone is not always sufficient to qualify. However, should you meet more than one qualifying criteria the greater the chance, and the greater the enhanced tax free lump sum you could receive.

As you can see enhanced lifetime mortgage schemes cover quite a wide spectrum of health and lifestyle conditions, in terms of severity. The amount that can be borrowed depends much on each individual case, and the health questionnaire allows the lender’s underwriters to actuarially assess how much they can afford to lend. In general, the more severe the health condition, statistically the shorter the lending term will be. This allows the lifetime mortgage provider to comfortably offer more cash without the threat to their no negative equity guarantee.

Enhanced lifetime mortgages are different from conventional equity release plans in that they allow you to maximise borrowing, and borrow more than any conventional equity release plan. In fact, an enhanced lifetime mortgage could allow you to borrow even more than selling 100% of your property under a home reversion plan!

Companies such as Aviva, Partnership and more2life are all now offering enhanced lifetime mortgage schemes and their criteria on impairment is slightly different, so it is always necessary to check with an independent equity release adviser. With interest rates fixed for life and starting from 5.57% with Aviva upto 7.65% with Partnership, there is a wide range of criteria to take into account.

These types of equity release schemes can be suitable for those who are possibly looking for the maximum lump sum available and not too concerned about any inheritance they may leave behind. These people may have certain lifestyle needs due to longstanding health conditions, or who have concerns about their longevity. They may therefore wish to make improvements to the property to account for any disability and hence maximise borrowings on their property.

Call 0800 321 3159 for further information on enhanced lifetime mortgage schemes today.

Do I Sell My Property To The Home Equity Lenders

The answer to this question lies with the type of equity release mortgage has been recommended. For instance with lifetime mortgage, drawdown lifetime mortgage, enhanced lifetime mortgage and interest only lifetime mortgage schemes you will retain 100% ownership of the title to the property.

In these cases the lender, like any residential mortgage lender they will merely place a first legal charge on the property. This protects the equity release provider, in that once the property is sold on death or moving into long term care, the lifetime mortgage provider will have first call on any of the sale proceeds.

However, a different set of rules apply for a home reversion plans.

Due to the mechanics of these schemes, effectively you will only own a fixed percentage of your property. The reason being in that in exchange for the tax free lump sum you require, a portion of the property ownership is transferred to the home reversion company. Therefore, should the provider require 40% ownership in exchange for the tax free lump sum, then you will retain 60% ownership which is guaranteed for your heirs once the house is sold.

All of these plans, however, allow you to remain in your property until you and your partner pass away or move into long term care.