Drawdown Lifetime Mortgages

Drawdown lifetime mortgages are one of the most flexible and popular forms of equity release available in the UK today. Here we’ll explain what a drawdown lifetime mortgage is, how they work, and reveal the best way to reach your financial goals when releasing equity from your home.

What is a drawdown lifetime mortgage?

A drawdown lifetime mortgage is a type of equity release where you take an initial lump sum from your property and place the remaining funds into a reserve facility, which you can then draw from later in a staggered approach, taking money as and when you need.

You continue to own your home outright, and no monthly repayments are required. Interest is only charged on the money you actually release, not on the unused reserve. The loan, plus rolled-up interest, is typically repaid when the property is sold after you pass away or move into long-term care.

How do they work?

With a drawdown lifetime mortgage, your equity release provider agrees a maximum amount you can borrow based on factors such as your age, property value, and health.

You then choose:

• An initial lump sum (released immediately)

• A drawdown reserve (available for future use)

Interest accrues only on the funds you’ve taken and borrowed. When you later withdraw money from the reserve pot, interest begins accruing on that additional amount.

Additional benefits

Most modern drawdown lifetime mortgages also have the benefit of including safeguards such as:

• A no negative equity guarantee

• Optional voluntary repayments

• Downsizing protection

• Fixed or capped interest rates

This structure gives you far more control over both day-to-day cash flow and long-term costs compared with taking a single large lump sum.

Drawdown lifetime mortgage examples

Here’s a simplified example to show how a drawdown lifetime mortgage works in practice:

Sarah owns a home worth £400,000. Based on her age and circumstances, she qualifies to release up to £160,000.

1. She takes £60,000 upfront to clear the existing mortgage and make home improvements

2. The remaining £100,000 is held in a drawdown reserve

3. Interest is only charged on the £60,000 initially

4. Five years later, she draws a further £20,000 to help her child with a house deposit

5. Interest then begins accruing on £80,000, still not the full £160,000

By using drawdown rather than taking the full amount upfront, you can see how someone could significantly reduce the interest that accrues over time.

How to get a drawdown lifetime mortgage

Arranging a lifetime drawdown mortgage follows a similar process to other equity release products, but specialist advice is essential for both financial planning and approaching providers.

The typical steps look like this:

1. Speak with an independent, qualified equity release advisor

2. They will review whether equity release is suitable for your goals

3. Compare drawdown lifetime mortgage products across the market

4. Decide how much to take upfront and how much to reserve

5. Complete the legal and valuation process

6. Release funds in stages once the lifetime mortgage completes

Equity release advice is heavily regulated, and you’ll need qualified expert guidance before you can start the process. If you’d like to have a free initial chat with a skilled advisor, you can get started here.

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How much can you borrow?

Most lenders allow you to release between 20% and 60% of your property’s value, although this varies by provider. The exact amount you can borrow with a drawdown lifetime mortgage depends on several factors, including:

• Your age (older borrowers can usually release more)

• Property value and location

• The type of property and the construction

• Health or lifestyle factors (in some cases)

You may see drawdown lifetime mortgage calculators online, and it’s important to realise that while these tools can provide rough figures, they can’t account for the nuances, such as lender-specific criteria, property details, or product features.

For accurate figures, a specialist equity release advisor is needed to calculate how much you can realistically borrow. Then they’ll compare the most suitable drawdown lifetime mortgage options available to you in today’s market.

Alternatives to a drawdown mortgage

While drawdown lifetime mortgages suit many older homeowners, they’re not the only option to consider. You might want to discuss these alternatives with your advisor:

• Regular lump sum lifetime mortgages, releasing all the funds upfront

• Downsizing, selling your home and moving to a smaller property

• Retirement interest-only (RIO) mortgages, making monthly interest payments

• Using savings or pensions first, if you can afford to

However, a specialist advisor can help you weigh up these options and determine whether drawdown equity release is your most suitable solution.

Why choose Money Helpdesk for your equity release

We work with experienced, independent equity release advisors who specialise in modern lifetime mortgages, including drawdown products.

Here’s why homeowners choose Money Helpdesk for their drawdown lifetime mortgage:

• Access to 5-star rated equity release advisors

• Free initial chat with no obligation to proceed

• Whole-of-market comparison of drawdown lifetime mortgages

• Guidance on financial and estate planning from experts

If you’re considering a drawdown lifetime mortgage, speaking to a skilled advisor can help you structure it in the most cost-effective and flexible way. You can get started here.