What is a drawdown lifetime mortgage?

Get flexible access to your funds with a drawdown lifetime mortgage

If you want to spread out the cash payments you can release from your home, then a drawdown equity release plan might work for you. With a drawdown lifetime mortgage, you can take an initial cash sum and have a pre-agreed facility from which you can withdraw additional funds as and when you need them. A lifetime mortgage is a loan secured against your home.

What is a drawdown lifetime mortgage?

A drawdown lifetime mortgage is a type of lifetime mortgage that lets you take the cash from your home as and when you choose to. You’ll get an initial lump sum, and then the rest of it can be withdrawn as and when you need it.

To qualify for a drawdown lifetime mortgage, you’ll need to be 55 or over and own a property in the UK that’s worth £70,000 or more.

How does a drawdown lifetime mortgage work?

• You agree with a provider the total sum of money you can borrow against your home with a lifetime mortgage. How much the provider will lend depends on the location, type and value of your home, as well as on your age. With some providers you can ask them to consider your health and lifestyle factors as well, as some conditions can affect the type of product you are recommended
• You take an initial lump sum, and you'll have a pre agreed cash facility, ready for you to release additional funds as and when you need them
• You’ll have limits on the amount of cash you can access at any one time (and minimum amounts apply)
• Interest is added to the amount you withdraw, not to the total sum of money you’ve arranged
• You don’t need to make monthly repayments unless you choose to
• The lifetime mortgage is usually repaid when you, or the last remaining borrower (if borrowing jointly) dies or goes into permanent long-term care.

How much does a drawdown lifetime mortgage cost?

Drawdown lifetime mortgage interest rates vary between providers, so you’ll need to understand the rate you’re being offered before making any decisions.

A drawdown lifetime mortgage will usually have a fixed sum of interest on each amount you borrow. An interest rate will be set when you take out the initial lump sum, then each time you want to take more of your cash facility, the interest rate for that amount will be calculated separately based on the lender's interest rates at that point in time.

The interest on a lifetime mortgage usually accumulates on a compound basis, meaning that interest is payable not only on the loan itself, but also on interest already added to the loan. You only make regular interest payments to reduce it if you want to (and the product chosen allows for them). The outstanding loan is usually only repaid when you (or the last homeowner in a joint agreement) dies or moves into permanent long-term care.

There may also be set up fees to consider, as well as legal and administrative fees that you’ll be told about before you go ahead.

What are the benefits of drawdown lifetime mortgages?

• Flexibility: with a drawdown lifetime mortgage you release cash as and when you need it from a pre-agreed limit, leaving some for future withdrawals.
• Interest: with drawdown lifetime mortgages interest is added only to the amount you’ve taken out so far, and not to the amount that remains in your cash facility.
• Benefits: because you only take money as you need it (in lower amounts) it may not affect the eligibility for means-tested benefits that you may be entitled to.

The benefits of lifetime mortgages in general include:

• Freedom to spend: you can use the money you release on almost anything you like.
• Tax-free cash: you don’t pay income tax on equity released as it’s classed as a loan.
• You still own your home: the plan usually finishes when the last borrower dies or moves into permanent long-term care.
• Interest is paid at the end of the plan: you don’t need to make monthly interest payments unless you choose to and the product allows it.
• ‘No negative equity’ guarantee: You or your estate will never have to repay more than the value of your home once it is sold following death or entry into long-term care.

What are the disadvantages of drawdown lifetime mortgages?

With drawdown lifetime mortgages you should carefully consider the following:

• Lifetime mortgages will reduce the value of your estate and will affect the amount you can leave as an inheritance when you die.
• The amount of money you owe will increase over time, as the interest is added to the loan plus interest already accrued unless you choose to make full regular interest payments.
• The interest rate is agreed each time you draw down funds, and it might be higher (or lower) than the rates you were offered at the beginning of the agreement.
• If in the future you want to release more funds than the initial agreed amount, you’ll need to seek advice on making a further application, which may not be successful.
• The cash released may still push you over the limit for some means-tested state benefits, so you might lose benefits that you rely on for living expenses.
• If you want to settle the drawdown lifetime mortgage before the end of its term, you could face early repayment charges.

You must always take professional advice before going ahead with any equity release product.

What’s the difference between a drawdown lifetime mortgage and a lump sum lifetime mortgage?

With a drawdown lifetime mortgage, you take an initial lump sum and then can take further money out from your agreed cash facility as and when you need it and interest only starts to apply when funds are withdrawn. With a lump sum lifetime mortgage you get the money in one go and the interest is added to the whole sum from the start.

What do you get with Saga Equity Release?

Saga Equity Release, provided by HUB Financial Solutions Limited, is an advice service for people considering equity release, including drawdown lifetime mortgages. As part of the service an adviser will look at alternatives to equity release and will complete a free state benefits check. The service offers:

An exclusive product

The product available through Saga Equity Release is the Saga Lifetime Mortgage provided by Just. Just are a leading provider of lifetime mortgages who have helped their customers release more than £6.7 billion from their properties. If you decide to take out a Saga Lifetime Mortgage you'll need to pay an advice fee of £799. A lifetime mortgage is a loan secured against the value of your home.

A 6-month Money Back Guarantee

If you no longer need the money, you can pay back what you borrow within six months of the completion date of your initial advance. You won’t need to pay any interest or any early repayment charges – you just pay the money back and walk away. To be eligible for this guarantee your initial advance must not exceed £150,000. There are other eligibility terms that you need to be aware of and you can find all of these on our Terms and conditions page.

The Saga Service Promise

The Saga Lifetime Mortgage comes with a Saga Service Promise included as standard. You can rest assured that we'll aim to release your money to your solicitor's account within 40 working days after your application has been accepted by Just (T&Cs apply). This promise will not apply if you're using the Saga Lifetime Mortgage to purchase a new property, rather than re-mortgaging an existing one.

Check your eligibility for equity release

Whether you're eligible for equity release will depend on a number of factors. Your eligibility will become clear when you talk to an adviser about your specific situation. The Saga Equity Release team will help you find out whether equity release could help you and is for those aged 55 or over with a UK property worth at least £70,000.

To check if you’re eligible for equity release, you can get started by answering a few questions on our online eligibility checker.