Lump sum vs drawdown

With a drawdown lifetime mortgage, you hold the flexibility to release cash as and when you need it, rather than in one lump sum. Following an initial release, you can draw down all or some of the remaining funds available when needed.

A drawdown is ideal if you don’t need all your cash in one go. For example, if you’re able to release £86,000 from your property, but you only initially need £40,000 for home improvements, a drawdown may be more suitable for you compared to taking your money in one lump sum. Our free calculator shows how much you could release.

A lump sum lifetime mortgage is somewhat self-explanatory. You receive your cash all in one go.

It’s perfect if you’ve earmarked your release for something specific, such as gifting the money to a family member or friend for a deposit on a new home.

But if you don’t need all the cash at once, there is another way.

Features of a lump sum lifetime mortgage

Lower interest rates 
A lump sum plan can come with a lower interest rate compared to other types of equity release. This will reduce the amount you owe when it comes to repaying the lifetime mortgage when your plan comes to an end. That’s usually from the sale of your home when you pass away or move into long-term care.

Fixed rate for life
With a lump sum lifetime mortgage, your interest rate can be fixed throughout your entire plan, so there are no surprises and you can be sure you know what’s owed. 

No monthly repayments
Typically, with any equity release plan, there are no monthly repayments for you to make. That’s because with a lifetime mortgage, the loan, plus roll-up interest, is repaid when your plan comes to an end. If you wish to make repayments to reduce the overall cost of your plan, however, you can.

Retain home ownership
With a lifetime mortgage, you’ll still own your own home. And the plan typically won’t come to an end until you, or the last remaining applicant, either passes away or enters long-term care. 

No negative equity guarantee
At Key, we recommend plans that meet the Equity Release Council standards. That means you’ll never owe more than your home’s worth. 

You can still move home
With lifetime mortgages that meet the Equity Release Council standards, you can still move home. That’s as long as your new property meets your lender’s criteria at the time. If it doesn’t, downsizing protection, which is available on some plans, allows you to repay your loan early without early repayment charges if you want to move property. It’s usually available after you’ve had your plan for five years.

You can leave an inheritance
With inheritance protection, which is available on some plans, you can ring-fence a percentage of your home’s future value to leave as a guaranteed inheritance. 

Complete your tick list
With one lump sum, you can tackle your existing projects in one go. If you want to make home improvements, sort out existing debts, buy a more practical car and spend some time in the sun, for example, you could do all this at once.