Lifetime mortgages that provide a drawdown facility are generally recognised as one of the cheapest equity release options, and fall under the basic category with other lifetime mortgages. These are among the most popular type of equity release schemes that people seek. There are many different features and advantages to a drawdown mortgage, and many things that you should know about equity release in general before settling on one particular type of mortgage or another.
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A lifetime mortgage with a drawdown option removes the need to take the maximum lump sum required at outset, and provides the facility to draw down smaller lump sums over time.
A standard lifetime mortgage is a single cash lump sum that is released immediately upon the mortgage completing, with no future payments being received. To release any additional equity would require a new lifetime mortgage application.
The advantage of a drawdown mortgage in comparison to a standard lifetime mortgage are many, including the following:
- Interest is ONLY charged on a drawdown mortgage when money is withdrawn. That means if you only borrow £15,000 of say an available £50,000, you will only incur interest on the £15,000 drawn down.
- Fixed interest rates are available, and usually range between 5% and 8% depending on the lender. If you take advantage of the FREE lifetime mortgage consultation, your advisor will confirm which product and rates are available.
- drawdown mortgage are cheaper than a standard lifetime mortgage because the interest on a roll up mortgage compounds from day one on the full amount taken as a lump sum. With the drawdown mortgage, tens of thousands of pounds can be saved by drawing equity out of the home in smaller amounts over a period of time.
How much can I Borrow?
Lenders all have different views on how much people can borrow and which people can borrow more than others. However, as a basic rule of thumb, the older you are the more you can borrow. For example:
A 60 year old man is able to borrow about 25% of the home’s value. That will increase by about 1% every year. Therefore, if he waits until he is 75, he can borrow about 40% of the home’s value.
However, bear in mind that each lifetime mortgage provider has different lending criteria, and so speaking with a lifetime mortgage adviser is always recommended to determine the most appropriate drawdown lifetime mortgage, and the maximum amount available to you .
The drawdown lifetime mortgage is often the cheapest equity release plan. However, this varies from one case to the next, so again, consult with an advisor.
Taking out a drawdown mortgage is a serious consideration and one where expert advice is essential to ensure you have all the facts.
To help with your understanding of drawdown lifetime mortgages and the options available to you simply…