A Drawdown Lifetime Mortgage
Another popular form of equity release is a Drawdown Lifetime Mortgage. This gives you the flexibility to release cash from your home over time (rather than a single lump sum) without the need to downsize or give up ownership. As with other Equity Release plans, the cash you release is yours to spend as you wish.
What is a Drawdown Lifetime Mortgage?
A Drawdown Lifetime Mortgage is a loan that is secured against the value of your property and in this way it is similar to a standard Mortgage and a Lifetime Mortgage.
How is a Drawdown Lifetime Mortgage different to a Standard Mortgage?
Unlike a standard Mortgage, you make no monthly repayments during your borrowing period. And, as the name suggests a Lifetime Drawdown Mortgage is just that, it has no fixed term.
How is a Drawdown Lifetime Mortgage different to a Lifetime Mortgage?
With a Drawdown Lifetime mortgage you release smaller amounts of tax-free cash as and when you need them, rather than one big lump sum.
What’s the benefit of releasing money over time?
In short, you could end up paying less interest. Interest is only charged from the date you release each amount.
How do you work out how much I can borrow?
The full amount you are entitled to borrow depends on your age, the value of your home and the equity available. This amount is then pre-approved for you to draw on as and when you need to.
What if I later need to borrow more?
When you’ve accessed all your agreed funds you might be able to borrow more. This depends on the future value of your home, your current age and how much you’ve already borrowed.
When is the loan repaid & what about interest?
Your loan is repaid from the future sale of your property. This generally happens when you die or, in the case of a couple, when the survivor dies or moves permanently into care. You don’t have the burden of monthly payments and the interest is only added to the loan as you borrow each amount.
So the loan increases over time?
Yes, however this is generally offset by any future increase in the value of your property and, because you haven’t accessed all the money right from the start, the associated interest is generally lower.
What if I already have a Mortgage?
That’s fine, some of the money you release will first pay off your outstanding mortgage and the rest is yours to spend on whatever you fancy.
Why choose a Drawdown Lifetime Mortgage?
With a Drawdown Lifetime Mortgage you still own your own home whilst enjoying tax-free cash to spend as you wish, all without the burden of monthly repayments. And, by staggering the amounts you release you are only charged interest from the date of each withdrawal, so the interest added at the end is reduced and you are more likely to able to extend your borrowing. Just think what you could do with all that money currently sat in your home.