The amount of equity you can release, if you’re eligible, can depend on various factors like medical conditions, if you’re a smoker, as well as your age. Therefore, approaching a later life mortgage advisor can be beneficial and an important step toward finding the best deal on the market for you.
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A lifetime mortgage may impact the value of your estate and it could affect your entitlement to current and future means-tested benefits. The loan plus accrued interest will be repayable upon death or moving into long-term care.
So I suppose a question that's gonna be asked more often than not Dan, is how much equity can a customer release.
Yes. This is almost the first question that most people ask. I think there's really two sides to this question.
There's how much can you release, so what's possible? And the other side of it is what's sensible, what is the best practice in terms of how much you can release.
I mean, the younger you are, the less you can release. The amount available is a calculation between the age of the younger borrower and the value of the property.
So it’s an important point for people to understand, isn't it, in that a fifty five year old who lives till in their eighties or nineties or perhaps beyond, it'd be a long time before that provider would see the return of that capital from the proceeds of the sale.
Yes. And because payments towards the interest are optional, they've got to leave enough margin in there to allow for compound interest over maybe forty years, which is why at fifty five you may be able to borrow up to thirty percent of your value of your property, but right at the top end, which is going to be very high interest rate, if you come back down towards ten percent twenty percent of the then you're gonna get a much more friendly rate.
That goes right up to when you're eighty five plus, you might be able to borrow around fifty seven percent of the value of the property.
But a much better idea, if you need this sort of money, is to borrow thirty to fifty percent which would give you a much more sustainable interest rate and keep a check on the amount of compound interest that's gonna add on to that.
In some cases, where people have underlying medical conditions. There are lenders that can take this into account, and they look at your life expectancy, based on these medical conditions.
And they may be able to offer you more money at a given age or slightly better terms. So it's always worth disclosing any medical details to your advisor so they can make sure that they can get the best possible deal in the market for you, even if it's using medical underwriting.
And the logic there being, of course, that the lender is more likely to get their capital back sooner.
Yes. Yes. They're not doing it out of the goodness of their heart. It's a logical decision that if someone has a life limiting condition, then they're going to live less time and the lender will get their money back sooner.
And what type of medical conditions have you come across where customers have been able to receive a higher amount?
Well, you find that in two ways. You you get the very serious ones like cancer. And certainly, if someone's had one or two episodes of cancer and it's a particularly aggressive form that's always going to trigger medical underwriting.
But what you also find is that lifestyle factors can can affect it, if someone's a smoker, if they have high blood pressure, diabetes, what you'll find is that quite often these conditions go hand in hand.
And if someone has two or three less serious indicators that might also trigger medical underwriting.
One of the lenders claims that sixty percent of customers could benefit from medical underwriting. Certainly, it's becoming more apparent in the industry, and the range of conditions and small enhancements that are possible are good there.
I mean, I think in terms of when we're talking about what you can borrow, you know, it's it's important also to think in terms of what you need to borrow.
So what often happens if someone will make an enquiry and say that they need twenty five thousand for a new kitchen twenty thousand for a new roof, these sorts of things.
Now apart from looking at grant funding to be able to reduce that outlay, it's also a useful idea to go and get some quotes because if you if you're borrowing twenty five thousand for a kitchen, that's only gonna cost you seventeen thousand, then that's something that we can use to reduce the amount of borrowing that's needed and again to reduce the impact on the customers estate.
And this is obviously a very high ethical way of transacting, and didn’t you have a recent example where a client was applying for equity release when, in fact, there was another option available to them.
Oh, yeah. Absolutely. The client approached me, his wife is experiencing the early stages of Alzheimer's, but still has capacity to understand what's going on.
She had a recent hip operation, which hasn't really done the job. And his wife's really struggling to get upstairs and to look after herself and they've been told that this is just gonna get worse.
Now they've had an assessment through social services and they don't meet the threshold criteria to qualify for funding.
So they approached us for equity release to raise thirty, maybe even forty thousand to cover the adaptations to the house that they wanted to make.
When we look at the alternatives for this, we're able to identify charity and another avenue of local authority funding, which is gonna mean that they're gonna manage to get most of the work done on grants or incredibly low interest funding from the local authority.
So they will still need equity release to meet some of their criteria, but what they're looking at is now far, far less than what they originally approached us for.
Yeah. Really fascinating stuff and like I said, it says a lot about the ethics of yourself Dan, and how we approach things as a company here to make sure we've exhausted all the other options, before embarking on the equity release option.
Thanks for your time, Dan. That's brilliant.