If you own your own home, it’s your main residence and want to use some of the money locked into it, you may want to consider taking out a lifetime mortgage.
As a long-term loan which is secured against your house, a lifetime mortgage has the benefit of allowing you to retain 100% ownership of your property.
Drawdown works by the lender initially calculating the maximum you could borrow from them. This is based on your age & property valuation. You then decide how much to initially withdraw from this overall facility. Any unused element is retained by the lender & available to withdraw anytime in the future.
You don’t make have to make payments on your loan during your lifetime. Traditionally, a lifetime mortgage will have roll-up interest, but more flexible equity release schemes nowadays do allow for repayments to be made.
The amount borrowed, plus interest of course, is paid when the house is sold, usually when you move into care, or die. It is therefore popular with retirees who want to use some of the cash locked into their property to pay for holidays, home improvements or a new car.
One popular type of lifetime mortgage is a drawdown mortgage. A drawdown mortgage also involves taking cash from your home, but in chunks, rather than one large amount. It gives you the freedom to take the money when you need it, and it has the benefit of costing less interest overall.
You could take some cash for a new car, then later for a holiday, and later still to help your grandchildren afford university – what you spend the money on is completely up to you.
As a drawdown mortgage involves just paying interest on the amount of money you have actually ‘drawn down,’ it should save you a considerable sum of interest over the plan’s lifetime.
The result of this is two-fold; it could mean your dependents are left with a greater sum of money in your estate once you pass away, or you have a greater residual balance of equity remaining in the property, as less interest will have been charged.
The flexibility of this type of mortgage appeals to many people, as it allows them to change their plans, if and when they need to.This is why a drawdown lifetime mortgage is currently the most popular equity release plan available in the equity release marketplace.