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Drawdown lifetime mortgages

  • Access tax-free funds from your home

  • Release your funds in chunks as and when you need it after an initial release

  • We'll explain the benefits, drawbacks, and costs of a drawdown lifetime mortgage

Am I eligible?

You could be eligible if you're:
  • A UK homeowner aged 55+
  • With a property worth £70,000+
Calculate now

What is a drawdown lifetime mortgage?

A drawdown lifetime mortgage is a type of lifetime mortgage that allows you to release tax-free cash from your home. This is through releasing in chunks, following an initial lump sum, as and when you need it.

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 in comparison to a lump sum lifetime mortgage.

The following reasons summarise why you may consider a lifetime mortgage:

You always own your home

You keep full ownership of your property, so you could use this money now - to help loved ones or make home improvements for example - without having to sell your home.

Choose how you get your funds

You can release funds from your home in a lump sum or a series of smaller amounts following an initial release. There are also flexible features available, such as voluntary ad-hoc repayments. The choice is yours as to which of the features are suitable to you.

No monthly repayments

There are typically no monthly repayments to make, as the loan, plus compound interest, is typically repaid through the sale of the property when the last remaining applicant passes away or moves into long-term care.

 This is a lifetime commitment - check the benefits and drawbacks before going ahead

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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. Firstly, you agree an overall sum of money you can borrow. You then take an initial lump sum and release smaller amounts when needed (subject to minimum amounts).

In addition to the features of a lifetime mortgage, some details of a drawdown lifetime mortgage are:


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

Organise finances

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

Use in a variety of ways

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

You can start benefiting from your drawdown lifetime mortgage when you are ready. The following steps are what you can expect as part of your drawdown lifetime mortgage journey:

  1. We will first find out more about you and your situation, and see if equity release is suitable for you. If it is, we can then agree on an amount you can borrow.

  2. You can take an initial lump sum, then leave the rest in reserves to be drawn out when you need it.

  3. Interest is then added to the money you have drawn down – not to the entire available reserve in the drawdown facility.

  4. There are no monthly payments with this plan. Instead the funds released, plus compound interest, are typically repaid through the sale of the property when the last remaining applicant passes away or moves into long-term care.

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Drawdown lifetime mortgage vs. lump sum lifetime mortgage

There are 2 types of a lifetime mortgage. The other type is a lump sum lifetime mortgage, which allows you to receive your tax-free funds all in one go.  Find out more about which type of lifetime mortgage could be right for you.

  • Release funds when needed

drawdown lifetime mortgage offers more freedom than a lump sum plan, allowing you to release money when you need it.

  • Save on interest

A drawdown lifetime mortgage also allows you to potentially save a considerable amount in interest over the lifetime of your plan, as the interest only accrues on the money you’ve released

  • Your drawdown facility isn't guaranteed

Your lender may have the option to withdraw your drawdown facility.

  • You don't know what interest rates will be like in the future

If you choose to make a drawdown, the funds will be subject to the prevailing, fixed interest rate at the time. This may be higher than your original interest rate,

  • Lower interest rates

Lump sum lifetime mortgages sometimes come with a lower rate of interest compared to a drawdown lifetime mortgage, which can help reduce your total cost of borrowing.

  • Interest rate won’t change

When you release your funds the money released is subject to the fixed interest rate at the time.

  • May be more expensive

As compound interest will be rolled up on the money you’ve released, you will end up owing more if you take all your available cash in one go. 

  • Limited ability to release further funds

With a lump sum lifetime mortgage, you can’t release further funds unless you apply for a further advance. This is subject to the lender’s criteria, your age and your property’s value at the time of application. This is not guaranteed and also requires advice. This is subject to fees.

ⓘ Illustrative example

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 (Annual Equivalent Rate). 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

Benefits and drawbacks of both types of a lifetime mortgage

We understand it’s important you have all the information you need about equity release to make an informed decision in your own time. All our equity release advice relates to Key lifetime mortgages only. Here's some benefits and drawbacks to keep in mind if you're considering a lifetime mortgage.

Lifetime mortgage benefits

Your specialist equity release adviser will explain:

  • You can unlock cash from your home, tax-free, to help meet your needs in later life
  • You’ll always retain full ownership of your home and can stay in it for as long as you wish with a Key lifetime mortgage
  • You can choose to make reduced or no monthly repayments to suit your circumstances
  • You’ll never owe more than your home’s worth with a Key lifetime mortgage
  • You may be able to remortgage your plan in the future to release further funds or secure a better interest rate, although this isn’t guaranteed and may be subject to early repayment charges

Lifetime mortgage drawbacks

Your equity release adviser will also outline the following important things to think about:

  • A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly
  • Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits
  • Equity release may leave you with limited or no property equity remaining
  • Equity release will reduce your financial options in the future
  • A lifetime mortgage is a long-term financial product and is not designed to be fully repaid until the death or entry into long-term care of the last remaining borrower, otherwise early repayment charges may apply

How does compound interest work?

Unless you choose to do so, there are no repayments to make on a lifetime mortgage until the plan comes to an end. As a result, you pay interest not only on the loan itself, but also on the interest already added to the loan. But there are ways you could reduce the total cost of borrowing of your lifetime mortgage.

Interest adds to your lifetime mortgage on a monthly or annual basis - this is dependent on your plan.

During that first period, interest is charged and added to the original loan amount. The original loan is the sum of tax-free cash you unlock from your home’s value.

  • Following this, interest is then calculated and charged on what you owe at the time. This is the original loan amount plus interest; not the amount you initially borrowed.
  • This new, larger amount of interest is then added to your loan. This cycle continues until the plan comes to an end.
  • This means a larger amount of interest adds to your lifetime mortgage each period.
  • The interest rate at the start of your plan determines how quickly the interest grows. This will impact the total cost of borrowing over the term of the loan.

An example of how compound interest accrues over 15 years

Product Balance at the start of the year MER¹ Interest added² Balance at the end of the year³
Year 1 £81,703 6.74% £5,681 £87,384
Year 2 £87,384 6.74% £6,075 £93,459
Year 3 £93,459 6.74% £6,497 £99,956
Year 15⁴ £209,360 6.74% £14,555 £223,915

Initial release amount of £81,703. Plan subject to a fixed interest rate of 6.74% MER (Monthly Equivalent Rate).
¹ All Key lifetime mortgages have interest rates fixed throughout the life of the plan
² Interest is charged on the balance as at the start of the year, not the original amount
³ The balance at the end of the year including compound interest
⁴ This cycle continues throughout the life of the plan

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How could a drawdown lifetime mortgage reduce my cost of borrowing?

You could save thousands over the course of your plan with a drawdown lifetime mortgage. This is because you only pay interest on the funds you release. Here's an example to help you understand how this could work for you.

ⓘ Illustrative example

This example is for illustrative purposes only. There are two customers with access to a lifetime mortgage facility of £81,703 at an interest rate of 6.74%. Future drawdowns are subject to the prevailing interest rate. Key Market Monitor Q1, 2023.

Customer A

Customer A decides to take £81,703 in one go through a lump sum lifetime mortgage. Interest is charged on the full release amount from day one.

(Orange bar)

Customer B

Customer B takes an initial loan of £51,703 to meet their immediate requirements. Interest is only charged on this lower release amount. Customer B then decides to make two further £15,000 drawdowns over time. Their total release amount is now £81,703.

(Blue bar)

Customer B saves £32,851 in interest charges
While Customer B still borrows the same £81,703 over 15 years, their total cost of borrowing is lower. This is because they take their money in stages. As a result, interest is only charged when they release their funds.

Customer B saves £32,851 in interest charges over the total life of their plan. This example is over 15 years but it could be longer or shorter. Axis shows total cost of borrowing.

Am I eligible for a lifetime mortgage?

If you're thinking about releasing equity from your home through a lifetime mortgage, check if you're eligible. You can check this by using our free online calculator.

To take out a lifetime mortgage plan with Key, you must be a UK homeowner:

  • Aged 55+ (including all joint applicants)
  • With a property worth £70,000+

ⓘ Did you know...

If you're not eligible now, why not try our later life mortgage finder? It may be that we can still help you take control of your finances in later life.

Back to "What's in this guide?"

Is a drawdown lifetime mortgage right for me?

The reasons for releasing equity from your home is different for everyone. There are different factors that may help you decide which lifetime mortgage plan is right for you.

If you are 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, folllowing an initial lump sum, to help boost your retirement finances, a drawdown lifetime mortgage could be a solution.

You can spend the funds in a variety of ways, whether you are dreaming of a once-in-a-lifetime holiday, want to make home improvements or help a family member.

Use our free calculator

Check your eligibility and how much cash you could release tax-free from your home. Try our equity release calculator.

Speak to an adviser

Book an appointment with a qualified equity release adviser at a time that's good for you. Find out what to expect from your equity release advice appointment.

Assess your options

If you want to learn more, your adviser will recommend the most suitable product. They'll provide a personalised illustration and answer your questions.

Is a lifetime mortgage right for me?

Equity release helps homeowners across the UK take control of their finances. It means they can live the later life that they deserve.

Explore how Key could help you put the life in later life. Request your free, comprehensive guide today.

Your other options

Here are some alternatives that may be more suitable for you:

Equity release costs

Here are some guides to help you understand equity release costs:

ⓘ If another product is more suitable, we'll refer you to a different adviser within Key Group who can help. If you go ahead, you'll only be charged the same £1,299 advice fee you'd pay with us, even if their fee is usually higher.

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How does the drawdown lifetime mortgage advice process work?

If you are considering a drawdown lifetime mortgage, then we recommend seeking advice from our qualified experts. Here is how our process works:

  1. One of our advisers will contact you at a time that suits you.

  2. We will take time to understand your situation and your needs, so we can find a suitable solution for you.

  3. Our adviser will then have an open, honest conversation about your options.

  4. We'll  tell you if we do not believe a drawdown lifetime mortgage is suitable for you, and consider your alternative options.

  5. If it is suitable, we will search the market for the right option for your circumstances.

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Why choose Key as your drawdown lifetime mortgage adviser?

It's a regulatory requirement for anyone considering a drawdown lifetime mortgage to get specialist advice before taking out a plan. So why should you choose Key?

We're regulated experts

Key is regulated and a proud member of the Equity Release Council

Trusted award-winners

We've won 80+ awards and 17,000+ excellent Trustpilot reviews, making us the UK's most trusted equity-release specialist

Highly experienced

We have over 25 years' experience in helping more than a million over-55s with tailored equity release advice on later-life products. Our fixed advice fee of £1,299 is only payable on completion.

Customer stories


ⓘ Did you know...

Over the years, our customers have benefitted from expert advice, experience and professionalism from Key. We've been rated 'Excellent' on Trustpilot and you can check out the great things our customers have to say about our lifetime mortgage plans.

All members of Key I spoke to were helpful and friendly, nothing was too much trouble for them

Ms Kane

"I recommend Key to anyone looking to take out equity from their home. My request went through very quickly, I already have my money and am starting to do the projects I wanted the money for. I am very pleased with the outcome and Key's staff."

I must say that Key were very helpful and understanding through the whole process

Mr Griggs

"We were put under no pressure to complete and constantly told that we could back out at any point prior to completion. They fully explained all of the Implications and costs of what we were thinking of doing. We had our own adviser who was patient with us and explained everything to us. So if you are thinking about equity release I would recommend Key."

We used Key to provide funds to upgrade parts of our house

Mr Dennison

"The Company were professional, supportive and explained the process very clearly. The meetings with Key which were conducted on Zoom were informative and friendly and at no time did we feel pressured. It was a positive experience. We would recommend Key to anybody considering equity release."

Drawdown lifetime mortgage FAQs

When it comes to releasing equity from your home, we understand that you may have questions too. To help, we have compiled the answers to the questions we get asked the most. If you are still unable to find the information you're after, we are just a phone call away.

A drawdown lifetime mortgage is a flexible way to access tax-free funds that can be used in a range of different ways. Some of the more common uses include:

  • Pay off your existing mortgage.
  • Pay for a holiday.
  • Gift family members money for a house deposit or university fees.
  • Pay off existing debt.*
  • Pay for home improvements.

*However, you should always think carefully before securing a loan against your home to repay existing debt.

Interest rates are liable to change often, so giving an exact figure can be difficult. However, you can see what the interest rates may look like by using our drawdown lifetime mortgage calculator.

Your estimate will provide the interest rate for the initial release amount but the interest rate for any subsequent drawdowns will be subject to the prevailing rate at the time.

If you have an existing mortgage, it will need to be repaid - the funds unlocked from your home with equity release can be used to do this.

Speak to one of our advisers if you want to find out more about paying off your existing mortgage with a drawdown lifetime mortgage. Request a callback or call us direct on 0800 188 4812.

Yes. Any drawdown lifetime mortgage that meets the Equity Release Council's standards lets you transfer the mortgage to a new property should you choose to move. However, this will be subject to the new property meeting the lenders criteria at that time.

Read our drawdown lifetime mortgage articles

A lifetime mortgage isn't something you should rush into. Read our RetireWise articles to learn more about how it works and whether it's right for you.

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How long does equity release take?

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Page last updated: Monday 23 October 2023