People with ill health, and especially the older population, can now gain a lot from answering short questionnaires about their health. Previously, ill health was a disqualifying factor when it came to mortgages. Insuring partners have come up with equity release plans that consider the health of a person in determining the amount that one can borrow against their property. Since these plans are made according to the life expectancy of a person, the more ill a person is the more the amount one can borrow. This option is known as ill-health lifetime mortgage.
The ill-health lifetime mortgage is no doubt cold sounding, especially since one has to prove that you may not have a long life expectancy compared to the average person. For example, for a person who is 80 years or above, the number of years that the standard plan assumes one will stay on the property before moving to an aided care institution or passing away are specific. This means that the mortgage company will wait for a specified period before taking over a property to recover their investment.
In order to qualify for the impaired or ill health lifetime mortgage, one has to prove that they are unlikely to live beyond a certain period. Once the proof has been verified, the lending company processes the request fast, giving you favourable interest rates. The impaired lifetime mortgage also features favourable payouts, which could be up to 30% more than the normal release schemes.
The application process varies depending on the policy of the company where you wish to apply for an impaired mortgage. Usually, the process is more involved than that of a standard mortgage. Some of the compulsory processes include filling out a questionnaire on health and lifestyle, and indicating if you suffer from any medical condition.
Medical conditions that apply for the enhanced lifetime mortgage include:
2. Issues due to smoking or drinking during your life
6. Other diseases with low life expectancy (Multiple Sclerosis, Huntington's, etc.)
The insuring partners have different requirements for the application process. The main insurers are Aviva, Partnership and More2life. These companies may require you to get a medical check up to prove the severity of your health condition. Aviva's Lifestyle Flexible plan has an interest rate starting from 5.42% and annual percentage rate of 5.6%.
Partnership's plan share a name with More2life's equity release plan, which is the Enhanced Lifetime Mortgage. It comes with a 7.45% interest rate and an APR of 7.5%. This plan is suitable for people who are 60 years and above, and comes with 500 pounds cash back guarantee. More2life, on the other hand, offers 6.6% monthly interest rate with 7.1% APR and a 1000 pounds cash back guarantee. It is suitable for people of 55 years and above.
Ill-health lifetime mortgage options do vary; however, if you are 55 years of age you do have an option of gaining help for owning your home. You may want to consider other situations before signing up for one of these mortgages. For example, when you die what will your family live off of? If you have a spouse will they have enough savings to make retirement? The idea of enhanced lifetime mortgage is for the house to be sold and the mortgage repaid upon your death. This could put your remaining family in a difficult situation. You need to understand that this policy option is not for everyone, but it does have benefits you might find useful based on your health and living situation.
The lump sum will be greater than a regular lifetime mortgage and it will still be dependent on your home equity. The more equity you have in your home the easier it will be to get a larger lump sum for when you need it. Housing values can also increase, which may help your loved ones as they reach retirement.
It is always a good idea to speak with your family to outline your plan and see what they feel about the ill-health lifetime mortgage. If you and your family have questions seek a financial advisor who can look at your current savings, retirement pensions, and your home value to determine if this type of mortgage or one of your other options is better. You want to live out your life comfortably without worries, so make certain you can with the right mortgage choice. Try out one of these schemes if you wish to buy a home or gain equity from your home, and your ill health is limiting you.