Drawdown Lifetime Mortgages
A drawdown lifetime mortgage is a variation of an ordinary lifetime mortgage. The main difference is that a drawdown lifetime mortgage offers you greater control over when to take all of your money.
With a drawdown lifetime mortgage instead of you releasing all of the available money at the outset, a maximum facility is created (still based on age of youngest applicant and property value) which allows you to take a smaller amount initially and then only drawdown further money whenever needed. Interest is only charged on the amount actually taken and not on the full facility. This helps avoids the debt building up so fast and also prevents you incurring much higher interest on the amount borrowed than you would receive by placing any money not immediately required on deposit.
Drawdown lifetime mortgages - advantages
As drawdown plans are only a variation of normal roll up lifetime mortgages, apart from sharing many of the same advantages of lump sum roll up schemes, drawdown lifetime mortgages have the following additional benefits.
- Creating a maximum facility but only taking what you need at the outset, means a drawdown lifetime mortgage gives you greater confidence that further funds should be available in the future if required.
- As you only incur interest on any amount borrowed and not the facility, you help preserve more equity in your property.
- Further withdrawals (within the limit created) can be taken as often as you like, normally from as little as £2-3,000 and involve little paperwork and no new legal work.
- Further withdrawals are normally available within 7-10 days.
Drawdown lifetime mortgages.- disadvantages
As well as having many similar disadvantages as
lump sum roll up lifetime mortgages, we would like to draw your attention to the following specific points about drawdown lifetime mortgages.
- Normally, the maximum facility you are able to create is slightly smaller than the maximum single lump sum for any given age and property value.
- The facility may only be available for a set period of time, usually 10 years, although you may be able to have the house revalued and the facility extended.
- Although further advances, like any initial advance will have a fixed interest rate for life, any new drawdown when taken will have the interest rate applying at the time it is requested. This could be at a higher or lower rate than the original advance.
- Some plans make an additional administration charge for further advances.
- Some schemes limit the maximum amount of facility to twice the original amount taken, meaning that to guarantee the maximum facility you may still be enticed to take more than you initially need, or alternatively, the maximum facility could be lower than normally available for someone of your age.
How much could you receive?
Try our lifetime mortgage calculator to receive an immediate estimate as to how much you could release under either a single lump sum or a drawdown scheme.
Further information
If you have any further questions about drawdown lifetime mortgages or other equity release schemes, or would now like to arrange a free home consultation, call us today for free on 0800 970 4883 or complete our online enquiry form.
This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
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Clicking on any of the following links will allow you to find out more about key information on releasing equity from your home.
Roll Up Lifetime mortgages | Fixed Repayment Lifetime Mortgages | Interest Only Lifetime Mortgages | How to request a brochure | How to book an appointment