Drawdown lifetime mortgages

Drawdown plans enable you to release the cash from your home in chunks as and when you need it, after an initial lump sum and subject to minimum amounts. Your lender agrees to an overall sum of money you can borrow, which is set aside for you.

As you only pay interest on the money you have drawn down you can save a considerable amount in interest over the lifetime of the plan.

In addition to the features and considerations of a Lifetime Mortgage, the details of a drawdown Lifetime Mortgage are as follows:

Key features

  • You can reduce the cost of equityThe cash value remaining in your home when all outstanding secured debts have been paid.  release by only taking as much money from your home as you need at any one time.
  • Your beneficiaries could end up with a greater inheritance, compared to if a lump sum plan is taken out.
  • These plans are more flexible than lump sum plans, meaning you can adapt to your changing needs in retirement.
  • These plans can help you to organise your finances so that you don’t miss out on means-tested benefits.
  • You can use the money you release for any purpose and can cover specific expenses, including home improvements or to pay university fees.

Things to consider

  • There is a minimum limit on the size of the lump sum you can take initially.
  • Some providers may not guarantee the reserve facility that you can draw down from and it could be withdrawn at a later date.
  • Future withdrawals can be at a higher interest rate than the initial lump sum.
  • You don’t know how much of your property value will be left to your beneficiaries, but you may be able to guarantee a percentage of the value as inheritance.
  • The loan provider has a first legal charge against your property – when the property is sold, the loan and interest will be paid to the provider and the surplus goes to your estateThe value of your assets at the time of your death, after all debts and charges have been paid. .
  • Early repayment chargesAs many equity release plans have interest rates which are fixed for life, a penalty may be levied by the lender if the loan is repaid before you and your partner either pass away or move into long-term care.Details of the early repayment charges specific to an individual plan will form part of your personalised illustration.  may apply if you decide to repay the loan.
  • A drawdown lifetime mortgage will reduce the value of your estate and may affect your entitlement to state benefitsMeans tested and non means tested benefits, distributed by government bodies, to which you may or may not be entitled. .

The diagram below illustrates the potential savings of taking a drawdown lifetime mortgage, compared with a single advance of funds:

Comparison between a lump sum lifetime mortgage and a drawdown option of £59,000 released over 17 years with an interest rate of 6.42% based on a 68 year old male.
Drawdown at end of year Outcome after 17 years
Option Initial advance 5 7 9 10 Interest charged Total owed
Single advance £59,000 n/a n/a n/a n/a £110,921 £169,921
Drawdown £20,000 £15,000 £8,000 £7,000 £9,000 £70,584 £129,584
SAVING £40,337

Did you know?

Our advisers explore all of your options with you. If they don’t think equity release is right for you, they’ll tell you!

Book a free consultationA meeting with your equity release adviser, either in the comfort of your own home or over the phone. It is your opportunity to learn more about equity release, enabling you to make a fully informed decision about whether it’s right for you.  with your local adviser and they will explain all of your choices.

This is a lifetime mortgage. To understand the features and risks ask for a personalised illustrationThis is a document which sets out the details of your recommended plan as they apply to you, alongside the associated terms and conditions. .

If you are considering equity release as your next financial move, you should read through is it right for you? carefully.