Drawdown lifetime mortgage

A drawdown lifetime mortgage is a type of equity release plan that enables you to take cash from your home in chunks, as and when you need it.

What is a drawdown lifetime mortgage?

You’ll get an initial lump sum followed by an approved cash facility that you can ‘draw’ from as and when you like. There will be a minimum amount that you can draw down at any one time – this is set by the lender and may vary depending on which plan you take.

Unlike a lump sum lifetime mortgage interest is only charged on the cash which you have drawn down, meaning this can be a cost-effective method of borrowing.

When you want to draw down more cash you will apply directly to the lender – usually it takes a couple of weeks for the money to land in your bank.

The eligibility criteria is the same as any equity release plan. See how much you could borrow with a drawdown lifetime mortgage.

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Drawdown versus lump sum

Drawdown lifetime mortgages have become the most popular type of equity release plan – taken out by over half of new customers in 2020 according to the Equity Release Council. Here are some of the reasons why:

  • Less interest to pay – interest is only added to the amount you draw down, not on your available balance
  • Security for the future – you have the peace of mind knowing that the money is there, should you need it in the future (although this is not always guaranteed)
  • More flexibility – you can release cash from your reserve as and when you need it
  • More inheritance – less to pay in interest means there could be more money left for your loved ones
  • Greater control – you can organise your finances in a way that won’t affect your means-tested welfare payments and benefits, for example not having over £10,000 in savings

Getting started with a drawdown lifetime mortgage

Get a quick quote

Use our free drawdown lifetime mortgage calculator to find out in minutes if you qualify and how much you could release.

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Speak to an adviser

Book a free adviser fact find call to find out from one of our experienced advisers if a drawdown lifetime mortgage is for you.

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Download our guide

Packed full of information, our guide is the perfect starting place for anyone considering a drawdown lifetime mortgage.

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Other types of lifetime mortgage

A drawdown lifetime mortgage isn’t your only option. Here’s two other types of lifetime mortgages that your adviser will consider for you, depending on your individual circumstances:

Roll-up lifetime mortgage

A roll-up lifetime mortgage (also called a lump sum lifetime mortgage) enables you to take a lump sum of tax-free cash and typically no repayments are made. This means the interest is added to the loan amount and the balance grows (compounds) over time.

Explore roll-up lifetime-mortgages

Interest only lifetime mortgage

An interest only lifetime mortgage is a relatively new kind of equity release plan where you can pay the interest due on a monthly basis. This means the size of your loan never goes up, making them an increasingly popular option for over-55s.

Explore interest only lifetime-mortgages

Frequently asked questions about drawdown lifetime mortgages

Do I qualify for a drawdown lifetime mortgage?

To qualify for a lifetime mortgage you must be over 55 and a UK homeowner with a property worth at least £70,000 – both if in a couple. If you have an existing mortgage you must repay the outstanding balance with the money released and your property must be ‘mortgageable’ in the eyes of the lender (like with a traditional mortgage). A drawdown lifetime mortgage might be perfect for you if you don’t need all of the money you release straight away but want to have it there.

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What happens when I want to draw down money?

When you take out your drawdown lifetime mortgage your will usually take a lump sum and then leave a pot of cash (called a reserve) with your lender. When you want to access this money you go straight to your lender, not your adviser. They each have their own processes but usually it will involve getting your request to withdraw funds in writing and then they will transfer the cash directly into your bank account. There is usually a minimum amount you can request each time.

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What are drawdown lifetime mortgage interest rates?

Each drawdown lifetime mortgage lender sets their own rates which vary by plan and loan-to-value. With so many plans across the whole market rates change constantly and sometimes daily. Average drawdown lifetime mortgage interest rates have been declining in recent years and are now between 4%-5%, with the most competitive rates below 3%. When thinking about a drawdown lifetime mortgage it’s important to consider features as well as rate, which our advisers will always do.

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Is a drawdown lifetime mortgage the right option for you?

A drawdown mortgage might seem like a good option if you want some extra money and don’t want to move house. However, there are some important ‘Things to think about‘. You need to look at how it will affect your future choices and financial situation in later life too.

Our friendly advisers can help you to explore drawdown lifetime mortgages – and the alternatives – without it costing you a penny. Only if you decide to go ahead we charge an advice fee of £995, payable on completion.

Your adviser will be able to explain how:

  • A drawdown lifetime mortgage is a loan secured against your home. It will reduce the value of your estate and may affect your entitlement to means-tested benefits
  • Compared to some other types of lifetime mortgage interest rates can be slightly higher with a drawdown plan
  • Different interest rates can apply each time you draw down cash – depending on the prevailing interest rates at the time this may be greater than your initial rate
  • There can be limits to the number of times money can be released in a certain period and how much you can withdraw at a time
  • If you want to pay off the loan early repayment charges (ERCs) can be substantial
  • Further amounts aren’t guaranteed – if you want to increase the total amount of equity you have agreed to drawdown over a specific period, you’ll have to apply for a further advance

 

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Don’t just take our word for it

Can I say a huge thank you for all your time and patience in explaining and ensuring that I have the best contract for my needs. It was clear that your guidance was not money driven but a concern for my future welfare and again I thank you. I would have no hesitation in recommending your services to anyone in the future.

Mrs C Trigg, Nottinghamshire

From the outset our adviser encouraged us to explore our scepticism thoroughly and this inspired confidence. He listened patiently and carefully assessed our rather complicated set of requirements. He acted in a totally professional yet friendly way, continuously ensuring that we had understood the options and the implications of any decisions to be made. He encouraged us to move at our own pace, retracing steps – sometimes several times – ensuring that equity release was right for us.

Mr and Mrs JD, Berkshire

My husband and I were very happy with the advice our adviser gave to us re equity release. There were several questions I had in relation to releasing some money but had not thought them through. Our adviser explained everything very clearly and I didn’t feel the push to go ahead some firms give. I felt that either way the decision was ours to proceed or not.

Mrs Colley, Wales

Our adviser James was extremely helpful and went through all options with us. He listened to what we wanted and explained everything and took his time.

What really impressed me with James was that instead of thinking of himself he was genuinely trying to find the best option for us, which in today’s world does not happen. I would certainly recommend James to anyone as he is honest, reliable and makes you feel at ease.

Mrs D Pepper, Lancashire

Your drawdown lifetime mortgage safeguards

As proud members of the Equity Release Council, all of the plans we recommend meet their standards, so that you:

  • Have the right to remain in your home for as long as you want, or until you move into full time residential care
  • Have the freedom to move to another property without financial penalty (subject to criteria)
  • Will never owe more than the value of your home with the no negative equity guarantee