All About Impaired Life Equity Release Plans

If you are able to prove that you will not live as long as the average person then you may qualify for an impaired life equity release or an enhanced equity release plan. This plan has been set up for those that have ill health and therefore they will be able to take advantage of it.

A standard equity release plan works on the basis that the individual will live for as long as 80 years or more. The insurance company can then only reclaim their equity once the person has died or has been put into a permanent long term care home.

When you are applying for this type of impaired lifetime mortgage scheme you will have to prove to the service provider that you are not going to stay in your home for a long period of time and that the provider can recoup the equity a lot quicker. As a person who is taking the impaired life equity release plan, you may receive more favourable rates and tax free pay-out and that can actually be up to 30% more than the standard maximum equity release plan.

The impaired life equity release is a little more complicated to apply for though as you will need to complete a short health and lifestyle questionnaire that will delve into your health and see if you are suffering or have been diagnosed with particular medical problems. If from the application it has been decided that your life is impaired, you may be able to receive a larger lump sum from the enhanced equity release provider.

Illnesses that May Qualify
1. Cancer
2. Heart disease
3. Aids/HIV
4. Obesity
5. Diabetes
6. Illnesses related to drinking or smoking

Illnesses that may qualify are varied from provider to provider, and there must be significant implications of health issues that could reduce your longevity. For example just because someone drinks or smokes they may not have health issues. On the other hand someone who smokes is more likely to develop lung cancer or cancers of the mouth. Someone who drinks can develop liver problems, but that does not mean their life would be over instantly.

Most impaired life equity release providers will want medical certification showing there is a prevalence of disease or that deterioration is already beginning for certain organs. A person with 70% chance of heart failure is more likely to be granted an equity release scheme under the impaired life option versus someone at 10%.

Calculating Potential Payout
You can use online calculator tools that will work out the amount of the pay-out from an impaired lifetime mortgage plan, but they can be slightly inaccurate and should serve only as a guide and not a definite figure. The impaired equity release works on the fact that the more conditions or greater the severity of your illness is then the more the equity release pay-out will be. There are three main providers of the impaired equity release: Aviva, Partnership and More2life.

The provider will look at several factors besides health before qualifying your application. They will look at your age, house value, current financial situation, and life expectancy. There is at least one enhanced lifetime mortgage provider who offers this scheme to individuals 55 years or older. Others may require you to be 65.

For your benefit it is best if you own your home without any other mortgage remaining. Obtaining a second mortgage under impaired life equity release is not impossible; however, it is a guarantee that you will leave no inheritance for your family. The difference with an enhanced lifetime mortgage versus a regular mortgage is no payment is required for the life of the loan.

You will not pay any interest or payment on the enhanced lifetime mortgage until you move to a new location or expire. A regular mortgage requires a monthly payment with interest and a portion of the principle paid. If you live longer than expected with an enhanced mortgage the interest will continue to grow until your home is sold or other money is used to pay it off.

Speak with family members about the impaired life equity release before you decide this is the right way to go. Your ill health can be an advantage, but you also want to be careful about leaving debt. This is probably the only time that ill health can actually be a benefit to you as you can release more money; because the insurance company is ensured that they will be able to get their money back quicker.