Drawdown Lifetime Mortgages
What is a Drawdown Lifetime Mortgage?
Some lenders offer a more flexible lifetime mortgage, known as a ‘drawdown lifetime mortgage'. The flexibility allows you take a smaller amount of equity in the beginning and then drawn down further borrowings when you need them. Due to the fact that you only pay interest on the money drawn down, the overall costs can work out to be much lower than a standard lifetime mortgage.
How do Drawdown Lifetime Mortgages work?
Obviously, elements of a typical lifetime mortgage apply to drawdown lifetime mortgage too, although there are some additional features of how it works to consider.
Firstly, you can reduce the overall costs of equity release by choosing to only take as much money as you need at any one time. Secondly, your family could reap the rewards of a greater inheritance, compared to a if a lump sum lifetime mortgage is taken out. Lastly, drawdown lifetime mortgages are more flexible, allowing you to adapt and change throughout your retirement.
The loan provider will have first legal charge on your property, if it is sold, resulting in the loan amount and interest to be will be paid off before any surplus becomes inheritable.
How much can you borrow with a drawdown lifetime mortgage?
Each individual circumstance is assessed accordingly, and amounts and rates may vary. However, it’s estimated that you could release equity to the value of between £10,000 and £600,000 if you live in England, or up to £250,000 for the rest of the UK.
Drawdown lifetime mortgages do not suit everybody. Individual circumstances play a huge part on whether an drawdown lifetime mortgage is the best option for you.
What are some of the benefits & drawbacks of a Drawdown Lifetime Mortgage?
- You can use the equity you release for any purpose
- You still own your property
- The flexibility allows you to better manage your finances and borrowing
- Likely to accumulate less interest
- There is a minimum limit on the size of the amounts you draw down
- Future withdrawals can come with higher interest rates
- You can’t be entirely sure of the exact amount of value in your property which will be left to your beneficiaries