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 drawdown equity release 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.
What is drawdown equity release?
Drawdown equity release 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 You’ll get an initial lump sum, and then the rest of it can be withdrawn when you like.
To qualify for drawdown equity release, you’ll need to be 55 or over and own a property in the UK that’s worth £70,000 or more.
How does drawdown equity release work?
- You agree with a provider the total sum of money you can borrow against your home in 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 and sometimes health. 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 the rest of the money is held in reserve, ready for you to spend when you need it
- You’ll have limits on the amount of cash you can access at any one time (and minimum amounts apply) but you won’t need to pay any further set up fees
- Interest is added to the amount you take, not to the total sum of money you’ve arranged
- You don’t need to make monthly repayments unless you choose to. The loan and interest are repaid when you, or the last remaining borrower (if borrowing jointly) dies or goes into permanent long-term care.
How much does drawdown equity release cost?
A drawdown lifetime mortgage will usually have a fixed sum of interest on each amount you borrow. You’ll agree an interest rate when you take out the initial lump sum, then each time you want to take more of your reserve, the interest rate for that amount will be calculated separately.
Drawdown lifetime mortgage interest rates vary between providers, so you’ll need to understand the rate you’re being offered before making any decisions.
The interest on a lifetime mortgage usually accumulates, and you only make regular payments to clear it if you want to (and the product chosen allows for them). The outstanding loan is only paid when you (or the last homeowner in a joint agreement) dies or go into permanent long-term care.
There will also be set up fees to consider, as well as legal or 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 reserved cash as you need it, 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 you hold in reserve.
- Inheritance: only paying interest on the smaller amounts that you’ve withdrawn could mean the total interest on the loan will be less compared to a lump sum agreement – so there might be more cash left in your estate for your family to inherit.
- Benefits: because you only take money as you need it (in lower amounts) you may still be eligible for means-tested state benefits.
The general benefits 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 release as it’s classed as a loan, even if you use it to top up your income.
- You still own your home: the plan 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 payments unless you choose to.
- ‘No negative equity’ guarantee: your estate will never have to repay more than the value of your home once it is sold following death of entry into long-term care.
What are the disadvantages of drawdown lifetime mortgages?
With drawdown lifetime mortgages you should carefully consider the following:
- Drawdown equity release will reduce the size 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 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 make 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 should 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 out the money as and when you need it and the interest is only added to the amount you’ve taken out so far. With a lump sum 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 is our advice service for people considering equity release, including drawdown lifetime mortgages. It’s a free service that includes an exploration of alternatives to equity release and a free state benefit check. It offers:
An exclusive product
The only product available through Saga Equity Release is the Saga Lifetime Mortgage provided by Just, a leading provider of lifetime mortgages who have helped their customers release more than £4.9 billion from their properties.
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 solicitors 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.
Saga Equity Release is provided by HUB Financial Solutions Limited.
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.
To check if you’re eligible for equity release, you can get started by answering a few questions on our online eligibility checker.
Find out more about being eligible for equity releaseFind out now
More on equity release
For more information and to help you understand equity release a little better visit some of our other articles and pages.