There is one way in which the poor health of pensioners can be beneficial to them – equity release. Equity release schemes allow retired homeowners to release cash from their properties. Many equity release mortgages take into account the medical condition of the person or persons applying for the mortgage to determine how much money they can take out of their properties. These mortgages are commonly known as impaired life equity release schemes.
Many equity release providers including Aviva, More2life and Partnership realize that pensioners with poor health have different needs than pensioners with good health and will therefore need more money to sustain their needs and to enjoy their lives with their family and friends while they are physically still able to do so.
The general rule is that the worse the health of homeowners, the more money they will be able to take out of their properties. Common health issues that are taken into consideration and that might result in a homeowners qualifying for more money include: diabetes, strokes, angina, cancer, heart attacks and Parkinsonís disease.
In most cases, pensioners are not required to pay the monthly interest but instead it is allowed to be rolled up until the mortgage has been repaid. In most cases, the mortgage is repaid when the homeowner dies.
Most equity release schemes are calculated based on the life expectancy of the person. A life impaired equity release scheme is based on the logic that poor health will have a direct impact on the life expectancy of the person. However if the person lives longer than is expected, there might be a danger in that the initial advance and the accumulating interest might become more than the value of the property. In order to prevent this, many equity release providers place a maximum loan that is allowed to be borrowed based on the age and the health conditions of the borrower.
With the help of online calculators, pensioners are able to estimate how much money they will be entitled to base on their age and their physical health. It is however advisable to seek professional financial advice before committing to an equity release scheme.
Alternatives to Life Impaired Equity Programmes
Also known as enhanced equity lifetime mortgages, these plans are not the only choice you have available to you in retirement. Rather you have three other lifetime mortgages and a home reversion plan that can also provide you with equity to live out your retirement age in better conditions.
The truth is that each mortgage has been designed for a specific set of retirees, in which someone that has a medical condition can get the help they need in a larger lump sum rather than waiting for what may never come.
It is in your best interest to search all alternative lifetime mortgage and equity release schemes to assure yourself that you have the best product on the market. One way to make certain of this is to speak with an adviser regarding the different advantages and disadvantages you may face.
Already you can understand that if your life expectancy is longer than your illness initially indicated, you can enter into a negative equity situation. There is a saving grace when this happens in the form of a negative equity clause. You have to make certain your life impaired equity release has this clause as some may not. The clause states that your remaining family does not have to pay any additional funds if the sale of your home does not cover the entire loan.
In other words, if you live longer than you initially thought and have accrued more in interest than the home value can cover your beneficiaries do not have to come up with the extra funds.
The downside to this and any equity release scheme is the sale of your home. For some it is not a big worry as the home would have been sold in the first place. For others selling their family home is devastating. This is the very reason you should speak with more than just a financial adviser before making a decision about your home and the life impaired equity release.
You family should be aware of what is happening and the potential lifetime mortgage you will adopt. In this way there are no surprises when the life impaired equity release needs to be repaid. Also keep in mind that anyone living in the house that is of retirement age may remain in the home until their death or move to a facility.
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