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Drawdown lifetime mortgages

Drawdown is a type of lifetime mortgage that enables you to take the cash from your home in chunks, following an initial lump sum, as and when you need it

What is a drawdown lifetime mortgage?

A drawdown lifetime mortgage offers more freedom than a lump sum plan, allowing you to release money when you need it. Firstly, you agree an overall sum of money you can borrow. You can then take an initial lump sum and then release smaller amounts when needed (subject to minimum amounts).

If you’re worried about drawdown lifetime mortgage interest rate accrual, it’s important to note that the interest only accrues on the money you've released. This means you could potentially save a considerable amount in interest over the lifetime of the mortgage.


How does a drawdown lifetime mortgage work?

Simply put, a drawdown lifetime mortgage is a way to release funds from your home without having to move or downsize. Although you will have to meet the same criteria set out with a lump sum lifetime mortgage, such as being over 55, a homeowner and a UK resident, a drawdown lifetime mortgage gives you the flexibility to release funds as and when you need them.

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

  • These plans are more flexible than lump sum plans, meaning you can adapt to your changing needs in retirement.

  • These plans could help you organise your finances, so you may not miss out on means-tested benefits.

  • You can use the money in a variety of ways and can cover specific expenses, including home improvements or to pay university fees.
     

Why choose a drawdown lifetime mortgage?

A drawdown lifetime mortgage has a range of benefits:

You get more flexibility: Release funds from your cash reserve as and when you need it! This gives you the freedom to use as little or as much as you want depending on your circumstances at the time.

You have less interest to pay: Interest only accrues on the funds you draw down once they are released so you'll have less of it to pay. Plus, no interest accumulates while your funds are still sat in the reserve.

It won’t have as much of an impact on benefits: Because you’re in full control of your finances from start to finish,  you can organise drawing down funds in a way that will help reduce the affect on any means-tested benefits you receive.

You won’t have any monthly repayments: Your loan plus accrued interest are repaid when your home is sold, you move into long-term care or if you pass away.

You can stay in your home: There’s no need to pack and move somewhere else. 

But you can move if you want to: As long as the home you’re moving to meets the criteria of your lender.
Speak to our experienced team today about other benefits available to you such as our ‘no negative equity’ guarantee. We’ll help you decide whether a drawdown lifetime mortgage is the right choice for you.

Drawdown lifetime mortgage examples vs. lump sum lifetime mortgage

If you’re looking for detail on drawdown lifetime mortgages, here is a comparison between a lump sum lifetime mortgage and a drawdown option of £64,000 released over 15 years with an interest rate of 6.1% AER. For illustrative purposes only. The interest rate applied to drawdowns will be the interest rate at the time of the drawdown.

Options Initial advance Drawdown year 5 Drawdown year 7 Drawdown year 9 Drawdown year 10 Interest charged (15 years) Total owed (15 years)
Single advance £64,000 n/a n/a n/a n/a £91,565 £155,565
Drawdown £20,000 £15,000 £8,000 £7,000 £14,000 £53,388 £117,388
SAVING £38,177

Is a drawdown lifetime mortgage right for me?

Borrowing money is different for everyone. There are a number of factors that may help you decide which equity release product is right for you.

If you’re aged 55 or over, you could be eligible for a drawdown lifetime mortgage. If you are searching for a way to access regular or occasional small amounts of money to boost your retirement finances, a drawdown lifetime mortgage could be the solution for you. The funds will be yours to spend in a variety of ways, whether you’re dreaming of a once in a lifetime holiday, want to make home improvements or lend a helping hand to a family member.

Things to consider

Your specialist equity release adviser will explain:

  • You have to get advice before releasing tax-free cash from your home - please read all our information and make sure it’s right for you
  • Key Equity Release offer lifetime mortgages only, which is a loan secured against your home. It will reduce the value of your estate and may affect your entitlement to means-tested benefits
  • All of our plans meet the Equity Release Council standards and come with several protections, including the no negative equity guarantee, which means you’ll never owe more than your home’s value
Page last updated: Wednesday 11 November 2020