What is a Drawdown facility for a Lifetime Mortgage?

Equity release is a way for homeowners over 55 to unlock cash tied up in their property without having to sell it. One popular option is a drawdown lifetime mortgage, which offers more flexibility than taking a single lump sum.

How a Drawdown Lifetime Mortgage Works?

With a drawdown plan, you take an initial lump sum of cash and then keep the rest in a reserve facility that you can access when required. You only pay interest on the money you actually release, not on the entire drawdown facility.

For example:
– You agree a facility of £60,000.
– You take £20,000 upfront.
– The remaining £40,000 stays in your drawdown reserve facility
– Interest is charged only on the £20,000 you’ve taken, not the full £60,000.
– Later, if you need more, you can withdraw from the reserve facility in stages.

This makes drawdown equity release especially useful if you don’t need all the money at once but want the reassurance of knowing more is available in the future.

Benefits of Drawdown Equity Release

– Lower interest build-up – since you only pay interest on money you’ve taken, your debt grows more slowly compared with a larger lump-sum plan.

– Flexibility – you can access funds as and when you need them.

– Control – great for managing spending on home improvements, top-up income, or unexpected expenses.

– Inheritance protection – by limiting unnecessary borrowing, you may be able to leave more to your beneficiaries.

Things to Consider

– Minimum withdrawal amounts – different lenders have different minimum withdrawal amounts.

– Eligibility – you must keep within the lender’s lending criteria for each withdrawal.

– Impact on benefits – taking money in stages could affect your entitlement to means-tested state benefits.

A Safety Net: The No Negative Equity Guarantee

Like other equity release products approved by the Equity Release Council, drawdown lifetime mortgages come with a no negative equity guarantee. This means you’ll never owe more than the value of your home.

Final Thoughts

A drawdown lifetime mortgage is a flexible way to release equity, allowing you to borrow only what you need when you need it. This can help you reduce the impact of interest roll-up while still giving you access to funds in the future. It’s important to seek advice to make sure the product suits your financial goals and family considerations.

If you live in Devon or Cornwall and would like to discuss Equity Release you can contact me using the link below:

Equity Release Advice – Stuart Ash – Mortgage Services

‘Your home may be repossessed if you do not keep up repayments on your mortgage’

A lifetime mortgage is a long-term commitment which could accumulate interest and is secured against your home. Equity release is not right for everyone and may reduce the value of your estate