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.