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Posts Tagged ‘Impaired Lifetime Mortgage’

How Your Medical History Can Enhance the Maximum Equity Release

Saturday, November 15th, 2014

Enhanced lifetime mortgage lifestyle questionnaire

While equity release schemes have been available for many years, the concept of the enhanced equity release seems to have been a more recent addition. However, the history of the impaired equity release has been around for almost a decade.

 

Companies back then such as Partnership & Hodge did offer enhanced or impaired life home reversion schemes. In fact Hodge themselves did have an enhanced lifetime mortgage that was withdrawn only pre credit crunch era. These plans were not sold a great deal and their impact was minimal.

 

More recently enhanced lifetime mortgages have seen a resurgence in popularity as they have been redesigned & improvements made to the underwriting process. Enhancement to an equity release mortgage means that the amount of equity available to you can be increased based on your current or pre-existing health conditions. It works similar to the impaired rates offered from annuity providers whereby based on a medical questionnaire, the lenders underwriters will assess the maximum equity release available.

 

Equity Release providers who currently offer Enhanced Lifetime Mortgage rates are:

  • Aviva
  • More2Life
  • Just Retirement
  • Partnership

Aviva equity release offer 2 plans; the Aviva Lump Sum Max offers a higher loan amount if you qualify for impaired terms. Alternatively, you could benefit from being charged a lower interest rate on the Aviva Lifestyle Flexible Option, with rates starting as low as 5.63% (5.7% representative APR).

 

More2life & Partnership offer a lower qualification threshold than Aviva for qualification on their enhanced lifetime mortgage schemes. Where Aviva offer one enhanced lifetime loan-to-value ratio, More2life & Partnership provide different levels of maximum release based on how serious the impairment is.

 

Just Retirement being specialists in the enhanced annuity market take a more scientific approach & will consider more illnesses including COPD. Their actuaries will individually assess each Lump Sum Plus case to determine the maximum equity release available.

 

What illnesses qualify for an enhanced lifetime mortgage?

 

Most of the impaired health conditions, which can qualify for enhanced terms, are similar with all of the above lenders and include-

  • Height and weight
  • Smoking details
  • High blood pressure
  • Heart attack
  • Diabetes
  • Stroke
  • Angina
  • Cancer
  • Parkinson’s Disease
  • MS
  • Early retirement due to ill health
  • Even whether prescription medication is being taken

The amount of extra money that you can release depends on three factors; age of the youngest applicant, the value of the property & which conditions you have & the level of severity of each impairment.

 

You may simply qualify for an enhanced lifetime mortgage based on your height and weight which is represented by your BMI (Body Mass Index). Typically, the greater the number of conditions you have, the higher the maximum equity release loan amount that is available.

 

What are the qualifying criteria for an enhanced equity release?

 

The minimum age is 55, which out of the four equity release companies only Aviva will accept and additionally there is no maximum age. Joint life customers can also apply although it’s usually the health of the younger person which affects any enhanced rate. The minimum property value can be as low as £60,000 from More2life while properties must be located in England, Scotland & Wales with Aviva also lending in Northern Ireland. The lowest enhanced equity release available is £10,000 with no upper limit from the likes of Aviva.

 

How much more tax free cash does enhancement provide?

 

A recent client of mine, age 69 had a property valued at £250,000. Based on standard terms he was able to release a maximum equity release loan of £86,250. However, he suffers with high blood pressure and diabetes. Based on his ill-health & completion of a health & lifestyle questionnaire, the loan amount was increased to £104,500 by More2Life, so he was able to release an extra £18,250.

 

He set the More2life enhanced lifetime mortgage plan on a drawdown basis. This enabled them to release an initial £30,000 and still leave a reserve facility of £74,500 with More2life which he can access in the future without incurring further fees. This meant he has the flexibility of a drawdown lifetime mortgage but with the benefit of an enhanced drawdown facility.

 

Will I need to have a medical?

 

The good news is that you won’t have to attend a medical to qualify for enhanced terms. Lenders ask you to complete a health & lifestyle questionnaire and sign to confirm that your medical details are correct. Following submission of the equity release application, each lender may simply write to your doctor to confirm that your conditions are accurate, so that you qualify for the best terms possible.

 

If you are a smoker, they may ask you to undergo a simple non-invasive test and require you to confirm your consumption and the extent of your smoking habit. The test, which they arrange and pay for, is carried out by a qualified nurse in the comfort of your own home.

 

How do I find out if I qualify for enhanced terms?

 

You should always to seek advice from an independent equity release specialist. As part of the process of checking whether equity release is suitable for you or not, we will always ask clients for details of their medical history to ensure that we can tailor any advice to their fit their circumstances. At the end of our initial meeting we would then conduct research from the whole of the equity release market to find the most suitable plan. If you do qualify for an enhanced rate, we can then produce an equity release key facts illustration to explain how the lifetime mortgage works.

 

Where can I get more information?

We have information on all the enhanced products in the compare equity release deals section of our website along with the useful enhanced equity release calculator.

 

If you wish to speak directly with me, please feel free to contact me direct on 07415 275669 or email simon@equityreleasesupermarket.co.uk for further information. There’s no obligation and any information you provide is confidential.

Aviva introduce two new flexible mortgage options for its equity release schemes in 2014

Sunday, June 1st, 2014

Aviva Flexible Lifetime Mortgage options

We have recently discussed the merits of the new 10% repayment option which are part of Aviva’s new range of flexible mortgage options that have been incorporated into the Aviva Lifestyle Flexi Plan & Lump Sum Max – Now Aviva Accept Voluntary Repayments – Does this Change the Future of Equity Release?

 

These new flexible repayment features provide customers with the ability to manage the future balance of their equity release schemes. However, further additions have been made which are a credit to the forward thinking of Aviva’s hierarchy.

 

The two further equity release options now included into both plans are the enhanced lifetime mortgage option and an early repayment exemption charge.

Let’s look at each option individually and understand why & how each new feature could potentially benefit future Aviva equity release plan holders.

  1. Enhanced Lifetime Mortgage Option

Previously, only the Aviva Lump Sum Max plan had the enhanced (also known as impaired lifetime mortgage) equity release facility. This means that anyone who has a history, or has medical records indicating they meet a list of qualifying illnesses could benefit from uplift in the maximum equity release lump sum they could receive.

 

However, Aviva has now put a reverse spin on how this equity release enhancement can work. Rather than the enhancement working to increase the maximum lump sum, they have reversed this by applying a twist on how the enhancement can operate. Therefore, on the revised Aviva Lifestyle Flexi plan now, should illness permit qualification for enhanced terms, then the interest rate will be REDUCED. Consequently, retirees looking for a release of equity & qualify for enhanced terms will receive a lower interest rate than the normal equity release rate.

 

No enhanced mortgage company has considered this approach previously, so why does Aviva now & how does this work?

Qualification rules for the enhanced lifestyle flexi plan

Firstly, Aviva will request a Health & Lifestyle Questionnaire be completed which will ask questions to ascertain eligibility for enhanced terms. Such health questions include:

 

  • Height & weight including Body Mass Index
  • Do you smoke more than 10 cigarettes a day?
  • Have high blood pressure?
  • Suffer from diabetes & take medication?
  • Had angina or suffered a stroke?
  • Had cancer in the last 5 years requiring chemotherapy
  • Suffer from Parkinsons disease or dementia
  • Kidney, heart, lung, liver problems
  • Retirement from work early due to medical reasons

 

Should any of these, or combination of these establish qualification for enhanced rates then a Key Facts Illustration can be generated by your equity release adviser. If terms are then acceptable & an application follows, then as part of the enhanced lifetime mortgage application process Aviva will clarify with your doctor whether your stated health issues are on your medical records. No medical examination will be required.

 

Whereas previously the minimum rate for the Aviva Lifestyle Flexi was 5.68%, if enhanced terms are available due to ill-health, then the rate can be reduced by a further 0.05% to just 5.63% (rate @1.6.14). Not a significant reduction it may seem, however considering roll-up of the interest and the compounding nature of the future balance this could save your beneficiaries a considerable sum of money in their future inheritance.

 

Therefore, in summary a lower equity release interest rate can be achieved by qualifying for enhanced terms due to poor health on the Aviva Lifestyle Flexi plan which also comes with the drawdown option. Possibly the best equity release plan in the current marketplace due to the extra low interest rate, cashback of £1000, free valuation, drawdown facility & the strength of the Aviva brand.

 

*A point to note here is that not all companies offer the same enhanced rates. Check you can at least obtain rates that are independent & NOT from Aviva direct as they will not be lower than companies such as Equity Release Supermarkets.

 

  1. Early repayment charge exemption

Since I originally advised on Aviva’s equity release plans almost 15 years ago, there has always been a stigma attached to their calculation of early repayment charges which can be upto a maximum of 25% of the original amount borrowed. The link with government gilt rates can be also confusing to many customers when calculating how they work in practice. Nevertheless a qualified equity release adviser should be able to assist with such calculations.

 

News stories have also highlighted cause for concern with potential early repayment charges. These charges have always been shown on their Key Facts documents, however occasionally situations can arise whereby even the flexible nature of these schemes cannot compensate for some unfortunate scenarios.

 

One notable example of this was the news story where someone needed to move into long term care with their partner following in order to provide their care in the home. This left them with an empty home and little option other than needing to sell up as they cannot rent out or leave the property unattended. With this being forced on them, they could incur a hefty penalty for repaying the equity release loan early based on the ruling that the partner did not need to move into care aswell.

 

Welcome changes to Aviva’s early repayment charges

Following examples of unfortunate events as previous which hit the tabloids, Aviva have since changed their plans to account for such scenarios and this is welcomed.

 

On plans now, the rules have changed should clients with a joint Aviva lifetime mortgage need to repay the loan due to death or moving into a long-term care facility. If such an event occurs Aviva will now allow repayment of the lifetime mortgage free of any early repayment charge. However, the condition is that this is actioned within THREE years of one of the client’s death or the date Aviva is advised that one of the mortgagors requires long-term care.

 

Therefore, in the above scenario their plight would have be accounted for and NO early repayment charge would be applicable. This will apply to many other people where at such a stressful time, the last thing they wish for is for another penalty to be applied in their lives. A simple concept which can have such alleviating consequences and has therefore to be commended.

 

If you have any questions regards the points raised  in this article please ring Freephone 0800 678 5159 or email me at mark@equityreleasesupermarket.co.uk .

 

 
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