What Is Drawdown Equity Release?

What Is Draw-down Equity Release?

Drawdown equity release is a type of lifetime mortgage that enables you to control precisely when you take the money from your home, thereby reducing the amount of interest that you pay. However, it is like all other types of equity release product in that you do not have to move out of your house in order to make use of the money that’s tied up in it.

Understanding The Drawdown Principle

Lifetime mortgages work by agreeing a loan with a financial services company that is secured against your home. You don’t have any repayments to make and the loan is only repaid when your house is sold – whether that is for moving into a smaller home or moving into care, or when you pass away.

A lifetime mortgage plan that does not offer the draw-down option will give you a fixed lump sum or income. Interest will be applied at the outset and will be calculated on the total amount.

A drawdown lifetime mortgage will provide you with a facility that is capped at the amount you agree with your lender. For example, you might agree a total amount of £150,000.   It is up to you when you access this money and you do not have to access it all at one time; you can take £20,000 and then use another chunk of money when you want. The key difference is that interest is only charged on the amount of money you have drawn-down. So, in this example, you do not pay interest on £150,000 – you pay interest on £20,000. If you draw down another portion of money, you will pay interest on the total amount you have taken but not on the total amount of your £150,000 facility.

You then continue to access your cash your drawdown facility has been used-up.