There is one mortgage available to retirees that actually makes being ill an advantage—the enhanced lifetime mortgage. It is also known as impaired or ill-health lifetime mortgage. No matter the name you call it the main point of the financial product is to offer homeowners a lump sum of cash that is tax free to live their retirement in comfort. Like standard lifetime mortgages it is given in a lump sum with compounding interest. This means the interest rolls up onto the capital sum so that repayment is not due until end of life or when a person moves to a long term care location.

Where the Difference Exists
From the above it might sound like enhanced lifetime mortgage is just another lifetime mortgage product, but there is one key difference that sets it apart and helps a certain percentage of retirees looking for a more financially stable retirement. The enhanced mortgage can provide two benefits in having a history of poor health.

1. Enhanced lifetime mortgages offer a higher maximum equity release loan to value percentage than standard schemes
2. Enhanced lifetime mortgages can reduce the minimum interest rate when not requiring a maximum equity release.

What? Yes, that might be your next question and it is a reasonable one. The ‘what’ is the loan to value percentage (LTV) where the loan provider determines how much they are willing to give you in a loan based on certain lending criteria. Lending criteria is based on age and property valuation as well as health issues.

The reason the maximum loan to value can be higher is because the age plus health issues indicates a shorter life expectancy. It means the return on investment for the enhanced lifetime mortgage provider is quicker than most lifetime mortgages. It also means less time for the interest to accrue and gives them breathing space to offer a bigger lump sum.

The loan to value is a percentage of current market value, age, and ill health considerations. For example a regular loan may offer 20% of the home value when a homeowner is 55, but the same homeowner with a health issue may receive up to 30% of the home value.

The main advantage for most applicants is receiving a higher maximum of funds when it is needed. The other advantages include tax free cash that can be used as the homeowner wishes, as well as repaying it at end of life rather than immediately. Should the maximum equity release not be required, then the Aviva enhanced lifetime mortgage will offer an even lower interest rate than normal.

Taking out more money also means there is a lower inheritance should life expectancy be extended beyond the statistical data. It also means that more funds are going to need to be repaid which could affect the inheritance left behind.

All lifetime mortgages have disadvantages, but the main focus is on how much financial stability is required during retirement and your lifetime to be comfortable. It is a specific mortgage, which also means there are other options that offer lower loan to value percentages. For homeowners who may not need as much cash upfront other potentials exist. Additionally there are potential ill health lifetime mortgages that offer drawdown options. A cash reserve facility can be on hand to ensure not all of the available funds are used at the same time. For some this can be a better option to combine the two types of mortgages.

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