Enhanced Equity Release – What You Should Know

Are you curious to learn about enhanced equity release? You've come to the right place. In this guide, we'll explain:

• What enhanced equity release is.
• How to know if you fit the rules for this plan.
• The good and not-so-good points of enhanced lifetime mortgages.
• The steps to get a real quote.
• The companies that offer these plans.

We know that equity release can seem tricky. But don’t worry; we’re here to make things easier. Our guide is full of useful tips to help you understand the process better.

This guide explains enhanced lifetime mortgages, including medical underwriting, potential costs and important limitations. A qualified adviser should assess suitability.

Let’s start our journey to understanding enhanced equity release together.

What is enhanced equity release?

Enhanced equity release is when you use a special type of lifetime mortgage, known as an enhanced lifetime mortgage. These equity-release mortgages ensure that the lender takes into account your health to assess how much equity you can release and/or the interest rate you receive. 

Some providers consider health and lifestyle and may offer a larger advance or different pricing. Poor health does not automatically produce either outcome.

What is a medically enhanced equity release plan?

A medically enhanced equity release plan is a plan that takes into account your medical history and overall health as part of the deal. You’ll need to complete a lifestyle questionnaire as part of the application process.

Enhanced lifetime mortgages in detail

An enhanced lifetime mortgage lender works from the logical principle that people with poorer health have a lesser life expectancy, and thus, they can provide a better deal to people who are expected to die sooner than others. They will analyse your daily lifestyle and medical records to make a judgement.

They will look at things like:

1. Your Body Mass Index (BMI)
2. How often you smoke and drink alcohol
3. High blood pressure
4. If you have diabetes
5. If you take ongoing prescription medication
6. Your medical records to identify instances of a heart attack, cancer or other serious conditions

These are some of the common health factors in lifetime mortgages, but it is not an exhaustive list. 

Do I qualify for an enhanced lifetime mortgage? 

If you tick any of the boxes on the lender’s health and lifestyle assessment to indicate poor health or a serious issue, you may qualify for an enhanced lifetime mortgage. However, qualifying for enhanced lifetime mortgages doesn’t stipulate how ‚Äòenhanced’ the mortgage deal will be. 

Each provider assesses health and lifestyle under its own criteria. Do not change smoking or drinking behaviour to seek terms; disclose the facts accurately and assess suitability independently of any enhancement.

To find out how much money you could release with an impaired lifetime mortgage, lenders sometimes include a special equity release calculator on their website. From my experience, using an equity release calculator is a great way to get a rough idea of what you can expect. However, for an accurate quote, you will need to go to a lender.

Do you need a medical for equity release?

Questionnaires and supporting medical information requirements depend on the provider. Do not assume no examination or further evidence could ever be requested.

What are the advantages of enhanced lifetime mortgages?

The most notable advantage of using an enhanced lifetime mortgage is that doing so could allow you to increase the amount of money you could release from a lifetime mortgage. And it could lower the rate of interest applied to your loan. 

This can be especially beneficial if you have a serious health issue and need the money to make life more comfortable, such as modifying your home (approval may be needed!) or seeing or doing things on a lifelong bucket list. 

The other pros of advanced equity release are:

1. The medical assessment process depends on the provider.
2. Any no-negative-equity guarantee applies subject to its conditions.
3. The money remains tax-free

What are the disadvantages of enhanced lifetime mortgages?

There are some disadvantages of these mortgages to be aware of, including:

1. Taking out a greater amount of equity could devalue your estate and reduce beneficiaries’ inheritance. 
2. They may take longer to set up if a doctor’s report or medical records are required.
3. Taking a greater lump sum could affect some means-tested benefits.
4. Early-repayment charges depend on the product and any exemptions; obtain the actual schedule.

Enhanced Lifetime Mortgages and Inheritance

Enhanced equity release plans can have a significant impact on beneficiaries and inheritance tax planning. Not only will the beneficiaries’ inheritance likely be reduced as a consequence of the equity release, but there also may be inheritance tax implications, resulting in the value of the estate being reduced further.

As such, before committing to an enhanced equity release plan, it is vital to discuss your options with a financial advisor. In some cases, an advisor may be able to give guidance on some strategies that would minimize the negative impact on estate value.

Which companies offer enhanced lifetime mortgages?

Not every equity release company offers enhanced mortgages because they are more time-consuming and complex to process. However, there are still a handful of providers that do and it’s important to search all of the market to find the best option for your requirements. 

Ask an authorised adviser which providers currently offer suitable medically underwritten products. Historical company names do not establish current availability or terms. See related guidance, related guidance.

What is a drawdown enhanced lifetime mortgage?

A drawdown facility may permit later withdrawals under agreed limits and terms. Later amounts can have different rates, and availability is not necessarily unrestricted.

What is the best type of equity release?

An enhanced offer is not automatically the best option for someone in poor health. Compare actual costs, benefits, care needs, expected use, alternatives and future flexibility with qualified advice.

However, you should still seek professional advice that is independent of your preferred equity release provider and is authorised and regulated by the Financial Conduct Authority (FCA). 

Is equity release a bad idea?

It’s impossible to say whether equity release plans are a good or bad idea. Whether or not you should use one will depend on personal circumstances and objectives. For example, somebody with no children to leave their estate to could be less worried about using equity release compared to someone with children who they know are relying on inheritance in the future. 

Everyone should get equity release advice before making a decision. 

What are some alternatives to equity release for individuals with ill health?

If enhanced equity release isn’t appropriate for you, there are other solutions for health-related financial needs, such as:

1. Enhanced Annuities: Annuities are a type of financial product that offers a fixed income for a lump sum. Enhanced annuities are similar to enhanced equity release plans in the sense that they take the applicant’s health into account.
2. Critical illness insurance may pay only for specified conditions meeting the policy definition and terms. Check any existing cover; a policy bought after a diagnosis should not be assumed to cover that illness.
3. Local Authority Grants: Some local authorities in the UK may offer grants to help people modify their homes so that they can live more independently.
4. Disability Benefits: If you are disabled or experiencing a long-term illness, you may be entitled to disability benefits. Such benefits will provide extra financial support to help cover the cost of healthcare, housing, and other expenses.
5. A personal loan may be available if the full eligibility and affordability criteria are met. A credit score alone does not establish acceptance or suitability.