Drawdown Lifetime Mortgage

Reid and Co Financial Services Ltd do not offer mortgage services, however you might be interested to read the brief summaries under the various headings shown in this section. They are purely provided for general guidance only and should not be relied upon. Your mortgage is probably the largest financial transaction and commitment you are likely to undertake. You should always seek mortgage advice which is totally independent and individually tailored to your needs.

How does it work?

Similar advantages and disadvantages as a regular lifetime mortgage, with additional issues that are unique to this kind of equity release scheme. The main difference 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 as and when required.

ADVANTAGES

1. You are in control of your money as you can release cash when it suits you , or you may be able to request a monthly income
2. You retain full ownership of your home
3. You only pay interest on the amount of equity released from your home, so interest could accumulate more slowly than with a regular lifetime mortgage
4. Drawdown Lifetime Mortgage plans may be available to younger people (aged 55+)
5. Some Drawdown Lifetime Mortgage plans let you guarantee an inheritance for your family

DISADVANTAGES

1. Interest rates are usually higher than on a standard lifetime mortgage
2. Reduced amount available to leave as an inheritance
3. Interest grows quickly as it is compounded
4. 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
5. If you want to increase the amount of equity released beyond the original amount agreed, you would normally have to apply for a further advance, which is not guaranteed
6. If you repay the lifetime mortgage loan early, you may have to pay an early repayment charge
7. Your tax position and certain state benefits may be affected