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 with no monthly payments to make
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

At Blestium Financial Services, we can refer you to Equity Release experts who can help get you the right deal; get in touch to find out more.

A Lifetime Mortgage is not suitable for everyone and may affect your entitlement to means tested benefits, so it is important to seek financial advice before taking any action. If you are considering releasing equity from your home, you should consider all options available before equity release.

The interest that may be accrued over the long term with a Lifetime Mortgage, may mean it is not the cheapest solution. As interest is charged on both the original loan and the interest that has been added, the amount you owe will increase over time, reducing the equity left in your home and the value of any inheritance, potentially to nothing.

Although the final decision is yours, you are encouraged to discuss your plans with your family and beneficiaries, as a Lifetime Mortgage could have an impact on any potential inheritance. We would also encourage you to invite them to join any meetings with your Financial Adviser so they can ask questions and join in the decision, as we believe it is better to discuss your decision with them before you go ahead. This is a referral service.