As you move closer to retirement, it becomes increasingly difficult to borrow money traditionally, as lenders recognise your income can be less regular. However, there are many different equity release products available to allow customers to borrow funds even after retirement. For accessing any kind of lifetime mortgage, you have to be at least 55 years old.
Source – @enbaeshoots
One of the products available is the drawdown lifetime mortgage. It allows the borrower to take a smaller initial lump sum (or even no money upfront) and then agree on a drawdown facility that can be used in the future (similar to an overdraft). If you use the drawdown (i.e. take money out in the future) you pay interest on it, if you don’t take any money out, you don’t have to pay interest.
A drawdown lifetime mortgage is suitable for those looking to draw cash tied up in their homes to have an additional income source and spend it on other things, such as a home renovation project or going on a holiday. Cash withdrawal in a drawdown lifetime mortgage can be accessed in two steps:
Taking out an initial lump sum amount, and withdrawing the remaining cash as and when you like.
Drawdown lifetime mortgages come with a compounding interest component (i.e. it adds up and increases over time). The interest has to be repaid when you move into a permanent care facility or when you die and your home is sold.
Here are some of the key features of a drawdown lifetime mortgage:
The eligibility criteria for most types of lifetime mortgages are largely similar, with few variations. The eligibility requirements for drawdown lifetime mortgage are as follows:
To conclude, a drawdown lifetime mortgage offers more flexibility if you are seeking a flexible cash withdrawing option compared to a lump sum mortgage facility. For further information, consult a financial advisor to calculate your suitability for a drawdown lifetime mortgage.
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4. Your home may be at risk if you do not keep up repayments. Think carefully about securing debt against your home. When consolidating existing borrowing be aware that extending the term could increase the amount repaid.