Property prices have soared, so homeowners have a substantial pot of savings in the form of their home. Normally, it isn’t possible to access this capital unless you sell your house, and the value of the house has no impact on your income or cash flow. This is exactly what equity release schemes allow you to do. Equity release schemes are essentially loans that are offered against the equity that has built up in a property.
The main attraction of equity release schemes is that they allow you to release equity from the property without the need to move out, or sell it and lose ownership. The loan is repaid once the property is sold, which is generally only when the applicant has either died, or moved into long term care. In case of joint applicants, the house can only be sold when the surviving partner has died or moved into a care home.
While different equity release schemes have different criteria, the basic considerations for lenders when considering an equity release application are: the value of the property; the amount that needs to be released or borrowed; the age of the applicant; and the health of the applicant. It is necessary for lenders to consider the age and health of the applicant as this allows them to make basic projections about the term of the loan. Actuaries therefore come into play by assessing life expectancy of the potential applicants of an Enhanced Lifetime Mortgage scheme.
From the point of view of the lenders, the sooner the loan is repaid the better it is for them. As such, they have no reason to refuse an application from someone who may not live as long as someone in good health. In fact, special equity release schemes will provide additional income, known as impaired life or enhanced lifetime mortgage. They are available to people who have a shorter life expectancy and would like to maximise their income from equity release.
Based on your health condition, age and the nature of your illness, lenders are able to work out how much you can borrow. As blunt as this may sound, impaired or enhanced lifetime mortgage schemes are underwritten by lenders based on the consideration that your lifespan is shorter than the average person.
Not only do equity release lenders lend to someone in poor health, but they may also offer far more attractive rates of lending, additional borrowing, and fast track processing. Lenders work out the viability of such schemes based on a short health and lifestyle questionnaire.