What is a drawdown lifetime mortgage?
A drawdown is a type of lifetime mortgage, allowing you to release smaller amounts after your initial release. This allows you to release funds from your home in portions that you control.
A drawdown lifetime mortgage allows you to release funds from your home when you need it, rather than in one lump sum. At first, you release an initial lump sum and can then release further amounts when required.
Only releasing your funds as and when you need them can be beneficial, for example, you’ll only pay interest on the money you’ve drawn down. It can often be a more cost-effective option, as the interest may accrue at a slower pace than if you take out all the funds in one lump sum.
Similar to a lump sum lifetime mortgage, it’s a way of releasing tax-free money from your home without having to sell up and downsize. Enjoy the freedom to access your agreed funds whenever you need with a drawdown lifetime mortgage.
How does a drawdown lifetime mortgage work?
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You agree an overall sum of money you would like to borrow from your lifetime mortgage provider. This is based on your age, property value and your health and lifestyle choices.
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You’ll release an initial lump sum from the overall amount of money
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When you want to draw down any of the remaining funds, you can release them in small amounts as and when you need.
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Interest is then added to the money that you’ve drawn down.
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There are no monthly repayments to worry about either! With a lifetime mortgage there are typically no monthly repayments to make as the loan, plus roll up interest, is repaid when the plan comes to an end.
Why choose a drawdown lifetime mortgage?
There are benefits and drawbacks of choosing a drawdown lifetime mortgage over other methods of equity release. It is important, however, that you explore all the options available to you and speak to a specialist equity release adviser about which option suits your situation.
With a drawdown lifetime mortgage, you will find that your interest may not mount up as quickly because you’re only paying it on the funds that you release, rather than the total amount in your facility. With a lump sum lifetime mortgage, you pay interest on the full amount from the start.
There are no monthly repayments on a drawdown lifetime mortgage either, and the no negative equity guarantee protects you and ensures your beneficiaries will not be left with a lifetime mortgage debt.
