Drawdown Plans

A drawdown lifetime mortgage has the same advantages and disadvantages as a regular lifetime mortgage, as well as a few more that are unique to this kind of equity release plan.

The main difference with a drawdown plan is that you don’t request the full sum of money available to you immediately. Instead, you decide on a maximum amount of equity you want to release, and ‘drawdown’ the cash in stages when and if you want to. The minimum age is 55.

Advantages of a drawdown lifetime mortgage

  • You can drawdown cash by making withdrawals as and when you need them, or you may be able to request a monthly income
  • You only pay interest on the amount of equity released, so interest could accumulate more slowly than with a regular lifetime mortgage.
  • You are in control of your money as you can release cash when it suits you
  • You retain full ownership of your home
  • Drawdown plans may be available to younger people (aged 55+)
  • Some drawdown plans let you guarantee an inheritance for your family
  • All equity release schemes are regulated by the Financial Services Authority, including drawdown plans

Disadvantages of a drawdown lifetime mortgage

  • Interest rates are usually higher on a drawdown plan than they are on a standard lifetime mortgage
  • There are restrictions on the minimum amount you can release
  • The amount you can leave as an inheritance will be reduced
  • The interest applied to the drawdown mortgage can grow quickly as it is compounded.
  • You can’t usually raise as much money through equity release with a drawdown lifetime mortgage as you could with a reversion plan, especially at younger ages
  • If you repay the lifetime mortgage loan early, you may have to pay an early repayment charge.

 

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