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.