Drawdown Lifetime Mortgages
Many consumers find the drawdown lifetime mortgage is the most flexible of all lifetime mortgage options, and therefore the reason for the popularity of the drawdown plan. For those homeowners who are looking for the most control over how they receive the equity they have built up in their home, a drawdown lifetime mortgage is often the best choice.
The drawdown lifetime mortgage plan allows you to control when you receive your cash and how. When you first invest in a drawdown equity release plan, you are given an overall cash reserve facility which is essentially your bank of cash to which you are entitled. From this facility, you are able to determine how and when you will receive your cash. You can decide how much you want to take out at first and how much you want to save for potential drawdown later should you find that you need access to more funds. This means that you are able to decide how you will take out your money, based on your personal and life circumstances and needs.
There is a unique advantage to the drawdown lifetime mortgage. Of course, you are able to have the majority of control over how and when you receive and spend your money. However, furthermore, you are also in a better position to save money as well. If you take out a smaller upfront payment to start your lifetime mortgage, you are not paying nearly as much in interest. This means that because you have more access to funds in the future, you do not have to take out more than you need at the outset of your lifetime mortgage. Instead, you can take out only what you need and accrue interest on that lesser amount until you find that you need more money. Then, you can take out future payments at the time at which you need the cash.
Like any financial product, there are both advantages and disadvantages to a drawdown lifetime mortgage.
Advantages of drawdown lifetime mortgages
1. Access to a cash reserve within a very short period
2. You only accrue interest on the actual money borrowed, not what is also saved up in the cash reserve
3. Many drawdown plans offer lower interest rate than other lifetime mortgage products.
4. You still own 100% of your property
5. You have control over when you take out additional money and how.
6. Most equity release companies do not charge any admin fees for further withdrawals from the cash reserve facility.
7. Useful plan when the applicant maybe on means tested benefits as the withdrawals can be managed to keep within benefit limits
Disadvantages of drawdown lifetime mortgage
1. There are circumstances where you may lose your access to your cash reserve. This could be after a number of years or might be because of economic reasons.
2. Any future withdrawals from your reserve will be subject to the current interest rate. This could be good if the interest rate is better, but could also be bad if the interest rate has gotten worse.
3. You might be capped when it comes to the size of your cash reserve, by the amount you initially take.
While drawdown lifetime mortgages work for those consumer who are looking for flexibility and control, it is important to get accurate and personalized information as to whether a drawdown lifetime mortgage would be right for you and your individual situation.