Plans > Drawdown Lifetime Mortgage

Turn equity in your home into tax-free cash instalments with a drawdown lifetime mortgage

Take an initial lump sum followed by payments as and when you need them

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What is a drawdown lifetime mortgage?

A drawdown lifetime mortgage appeals to people who need extra flexibility when accessing the equity in their home. It lets you take an initial lump sum, and then draw additional cash instalments over time.

As with other forms of lifetime mortgage, it’s a secured loan for people aged over 55 that’s typically repaid only when you pass away or go into long-term care. You retain full ownership of your home in the meantime and may be able to ‘ring fence’ some of its equity so that you leave an inheritance for your beneficiaries.

You can use the extra flexibility of a drawdown lifetime mortgage to add regular tax-free cash to your retirement income, or to take payments as and when you need them. Also, a big advantage of a drawdown arrangement is that interest doesn’t mount up as quickly as with a regular lump sum lifetime mortgage because you only pay interest on the amount of cash you release, rather than the total sum in your reserve.

Equity Release Wise brings you access to the best drawdown lifetime mortgage quotes and deals through one of the UK’s largest equity release specialists. Find out how much you can borrow: check here or talk to one of our friendly consultants by calling 0808 178 3055 or request a call back.

Did you know?

Equity release is now a well-established way to access a lump sum or multiple cash payments in retirement. The Equity Release Council have reported that more than 592,000 new equity release plans have helped homeowners aged 55+ to access £38.7bn since 1991.

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How does a drawdown lifetime mortgage work?

With a lump sum lifetime mortgage, you can only access cash tied up in your home (equity) as a single payment. That’s fine for many people, for example when a large lump sum is needed to help your children get on the property ladder.

But you may prefer the flexibility of being able to take the cash in a series of payments. That’s how a drawdown lifetime mortgage works: you take less than the maximum allowed as an initial payment, and the rest in further withdrawals.

The amount remaining after your initial withdrawal will be left ‘in reserve’ for you to access when you need it, subject to the terms of the loan and approval for each release.

You’ll know how much is left in reserve as your lender will keep you informed. This will typically be through an annual statement, but you can also contact them to confirm an up-to-date figure. Some lenders also provide an online account where you can keep track of your plan and manage your payments.

Read more: How does equity release work?

How much can I borrow on a drawdown lifetime mortgage?

Several factors will determine how much you can borrow. They include the property’s value and how much equity you have in it. Your age will also be considered. You must be 55 or over to qualify, and the older you are, the more you can borrow.

Maximum borrowing typically ranges from 25% to 60% of the property’s value, with a minimum release of £10,000. If you have certain health issues such as diabetes, high blood pressure or angina, or lifestyle factors such as smoking, you may be eligible for an enhanced lifetime mortgage that may enable you to borrow more money.

To find out how much you could borrow, check here or talk to one of our friendly consultants by calling 0808 178 3055 or request a call back.

Read more: How much equity can I release?

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Am I eligible for a drawdown lifetime mortgage?

Lending criteria for drawdown lifetime mortgages will be different for each lender, but here are some examples of typical criteria as a guide:

  • You will need to be aged 55 or over and a UK resident. 
  • When a couple applies for a drawdown lifetime mortgage, the youngest applicant on the deeds of the property must be 55 or above.
  • You must own your own home in the UK, and it should typically have a value of £70,000 or more.

Read more: Am I eligible for equity release?

Check your eligibility

Call us on 0808 178 3055 and we’ll arrange a free, no-obligation appointment and lifetime mortgage advice* from a specialist who will confirm whether you are eligible. If you’re unable to talk now, request a call back and we’ll call when it’s convenient to you.

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Already have a lifetime mortgage?
You could switch for a better deal

Now could be a good time to switch to a different lifetime mortgage. You may be able to release more tax-free cash due to being older than when you took out your existing plan. An increase in your property’s value or being in poorer health could also qualify you for further cash. Interest rate changes may also save thousands over the lifetime of your plan.

Why not arrange a free review* to find out if switching works for you?

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When are drawdown lifetime mortgage interest rates calculated?

Drawdown lifetime mortgage interest rates are based on the rate applicable when you make each withdrawal. This could be higher or lower than the interest charged on your initial lump sum payment. Your lender will let you know the interest rate each time you apply for a withdrawal.

Interest is only charged on the money you actually borrow, rather than the full amount of loan you are eligible for. This means less compound interest builds up than with a lump sum lifetime mortgage, so there could be less to pay back through the sale of your house.

Some plans also give you the option of paying some or all of the interest as the plan goes along, rather than adding it all to the total payable through the sale of your home. If you do decide to make interest payments, opting for a drawdown facility will reduce the amount to pay compared to taking all the money in one go.

Drawdown lifetime mortgage examples

A wide choice of plans are available, with a range of flexible product features. This means you have plenty of options to consider when choosing the right plan for your circumstances and needs.

Drawdown lifetime mortgage examples include plans where you choose to ring-fence some of the value of your property to leave an inheritance for your loved ones. Other features that may be available to you include options to make partial repayments of the loan capital, and to make interest repayments to avoid or reduce interest building up on the loan.

Another feature you’ll benefit from is the Equity Release Council’s no-negative equity guarantee. We only work with providers who support this guarantee, which means that your estate will never owe more to your lender than the property is worth when it is sold.

What are the benefits of a drawdown lifetime mortgage?

Depending on your circumstances, choosing the drawdown version of a lifetime mortgage may bring you some welcome benefits:

More flexibility – your financial needs in retirement may change over time, so you may welcome the opportunity to take your cash when it’s needed the most.

Less interest on the loan – interest is only paid on the money that you draw down from the plan. This means less interest is likely to accrue than if you were to unlock your maximum release with a regular lump sum lifetime mortgage.

Reduce the impact on state benefits – the money you release through equity release can impact any means-tested benefits you receive. This is because the Department of Work and Pensions (DWP) and local authorities impose bank savings limits that can affect your eligibility to benefits. By taking your cash in instalments, you may be able to avoid going over the savings limit.

To establish whether these benefits apply to you, our selected advisers will review your individual circumstances. Arranging a consultation couldn’t be simpler: call us on 0808 178 3055 or request a call back.

Paying off a drawdown lifetime mortgage

A drawdown lifetime mortgage is usually paid off when the borrower passes away or moves into long-term care. In a joint plan, it’s repaid when the second person passes away or goes into care.

Some plans have the option of paying off all or part of the loan early. If you do take this option, you may need to pay an early repayment charge to the lender. Some lenders however have an ‘early repayment period’, after which time no charge would be needed. Also, the lender may not charge if the loan is repaid within a specified time of one of the people in a joint plan passing away or moving into long-term care.

An option to repay the loan early could be attractive if you think your financial circumstances might change in the future, enabling you to make a repayment. If this option is a feature you’re interested in, please mention this and our selected equity release advisers will explain the options in more detail.

Which companies have drawdown lifetime mortgage products?

There are several drawdown lifetime mortgage providers to choose from and it may be inconvenient for you to talk to them all individually. To make life easier, Equity Release Wise can arrange a comparison from top providers to help you find the best drawdown lifetime mortgage.

Here are some of the leading providers that your search will compare. They are all authorised and regulated by the Financial Conduct Authority and are also members of the Equity Release Council.

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Apply for your no-obligation equity release quote

Find out if you qualify for equity release and how much you could borrow. Just click ‘Get started’ or call us on 0808 178 3055 and one of our team will be delighted to help arrange a free consultation and quote*.

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Answering your questions

Still unsure of a few things? We’ve got you covered with answers to some of our most frequently asked questions.

  • Is there a difference between a lifetime mortgage and equity release?

      There are two main types of equity release, and a lifetime mortgage is one of them. This is where you take out a loan secured against your property, keep ownership of it and still have the right to live there. It’s far and away the most popular form of equity release. The second type is known as home reversion, where you sell your property or a percentage of it. Here too, you still have the right to live there, but this will be as a rent-free tenant rather than as owner of the property.

  • What costs are involved with a lifetime mortgage?

      Just as with a normal residential mortgage, you should be aware of costs involved in setting up an equity release lifetime mortgage. Your adviser will make sure you understand these in full before you decide whether to take out a plan, but below is a summary.

      Your lender will typically charge valuation, arrangement and completion fees, with further fees payable to the solicitor who acts for you. Some of these fees can be paid from the money you borrow, so you may not have to worry about finding them from your existing savings.

      Our selected advisers naturally charge an advice fee – but remember that any initial advice or information you receive from them is completely free and without obligation. You only pay them a fee if you apply AND your case completes.

      Once a plan is taken out, there aren’t normally any fees. One exception is an early repayment charge that some lenders request if some or all of your lifetime mortgage is paid off before you pass away or move into long-term care.

  • What are average drawdown lifetime mortgage interest rates?

      Even though interest rates on loans and regular mortgages may be rising, the opposite has been true for equity release rates recently. This is Money reported that plans ‘can now be found with rates as low as 3% in some cases’ – significantly lower than has previously been possible.
      Please be aware however that an interest rate is calculated for each withdrawal from a drawdown lifetime mortgage. So if rates rise, your interest rates on future withdrawals could rise too.

  • Are drawdown lifetime mortgage plans available in Scotland, Wales, Northern Ireland and England?

      Yes, drawdown lifetime mortgages and other forms of equity release are available across every country in the UK. When you contact Equity Release Wise, we will connect you with our carefully selected advisers who can help you find the best plan for your circumstances.

  • What are the potential risks of a drawdown lifetime mortgage?

      A drawdown lifetime mortgage has worked for thousands of over 55s in need of tax-free cash. But it’s important to understand some potential risks before deciding if it’s right for you:

      • The ongoing availability of your drawdown facility is not guaranteed by the lender. If your circumstances change significantly after taking out your initial lump sum, your lender may not accept further requests to release money. Examples may include another charge added to your home, becoming bankrupt, or a large fall in the property’s value. Lenders may also reserve the right to close access to the reserve in situations such as high interest rates or property market changes. Please see your chosen plan’s terms and conditions for details.
      • Drawdown lifetime mortgage rates are calculated daily and the interest is added to the amount you owe each month. The amount owed therefore increases and reduces any equity left in your home when the plan ends, unless you choose to make interest payments while the plan is running.
      • Taking equity out of your home will mean that the inheritance you leave to loved ones will reduce. Each time you take money from the plan, the level of possible inheritance will reduce.
      • If you give some of the money you release to family as a gift, they may be liable to pay inheritance tax in the future.
      • You may have to pay an early repayment charge if you choose to pay back some of the loan early.
      • Borrowing money and building up your savings through a lifetime mortgage may affect your entitlement to some means-tested state benefits. During your appointment with one of our selected equity release advisers, they will help you establish whether your benefits could be affected.

Other types of equity release

Other forms of equity release may be more suitable for you than a drawdown lifetime mortgage. Find out more below, or talk about your options to one of our selected advisers so that you can get the best solution for you:

Product lump sum icon

Lump sum lifetime mortgage

Access a tax-free cash lump sum if you’re a homeowner aged 55 or over. You retain full ownership and can stay at home until you pass away or move into long-term care.

Read more about lump sum lifetime mortgage plans
Product interest only icon

Interest-only lifetime mortgage

A more cost-effective method of equity release where you make voluntary interest payments to reduce or prevent compound interest building up.

Discover more about interest-only lifetime mortgage plans
Product enhanced icon

Enhanced lifetime mortgage

Certain health conditions or lifestyle factors could qualify you for higher cash releases or lower interest rates. A simple questionnaire is all that’s needed to check eligibility.

Read more about enhanced lifetime mortgage plans
Product second home icon

Second home lifetime mortgage

If you have a second home you may be able to secure a lifetime mortgage against it, or make your dream of a second home come true with a release from your main residence.

Read more about second home lifetime mortgage plans
Product buy to let icon

Buy-to-let lifetime mortgage

These specialist plans could enable you to release equity from a buy-to-let property, or to use the wealth in your home to help you make a buy-to-let investment.

Read more about buy-to-let lifetime mortgage plans
Product home reversion icon

Home reversion

A type of equity release where you sell all or part of your property at less than market value in return for a lump sum, a regular income, or both. You stay in your home rent-free.

Learn more about home reversion

Still have questions?

We hope this information has been useful. To find out more or arrange a consultation with an adviser, please call or request a call back and we’ll be happy to help further.

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+ Client testimonials refer to the service provided by our selected equity release advisers. We have changed the clients’ names and certain identifying information to protect their privacy.

Please note that equity release will involve a home reversion or a lifetime mortgage, which is secured against your property and will reduce the value of your estate and impact funding long-term care. To fully understand the features and risks, ask for a personalised illustration. Equity release requires paying off any existing mortgage. Any money released, plus accrued interest would be repaid upon death, or moving into long term care.