Drawdown plans have become the most popular product in the equity release market, taken out by 56% of new customers in the first half of 2020, according to figures from the Equity Release Council.
A Drawdown lifetime mortgage allows customers to make planned withdrawals of their property’s equity over time. Because interest is only charged as money is drawn, this can be a cost-effective method of borrowing.
Drawdown versus lump sum
At present, there seems to be an almost even split between those who want to take a lump sum out and those who would prefer a drawdown product, with 57% opting for drawdown and 43% choosing a lump sum.
Staged payment tends to work better for releasing money for your family’s education fees or taking holidays for example. Whereas a lump sum seems to be the preference for customers looking to refinance debt, pay mortgage deposits for their children/grandchildren or to purchase a new car.
Another potential benefit of drawdown plans seems to be using the money to assist a family member who needs support and may need additional funds in the future.
Normally when a client is receiving benefits, those benefits are means-tested, lost or reduced if the client’s savings exceed £10,000. However, having access to the drawdown facility means it’s not counted as their money, allowing them to retain the benefits by simply drawing down on the reserve facility as and when it’s needed – provided they don’t exceed the benefit testing limit.
Am I eligible for a drawdown lifetime mortgage?
If you’re considering a drawdown lifetime mortgage, then we recommend you take professional financial advice to understand whether equity release of this type is suitable for you and your goals.
Normally, to qualify for a drawdown lifetime mortgage your property needs to be:
- Worth £70,000 or above
- Your main residence
- Made of standard construction
- In England, Scotland, Wales or Northern Ireland.
Further to the above:
- The youngest applicant needs to be 55 years or older
- You must own your own home (the outstanding mortgage must be less than you are looking to borrow)
- You must be a UK resident.
How do I know how much my property is worth?
To get a (very rough) estimated value of your home, then you could have a look at rightmove.co.uk or the Halifax House Price Index. This will give you an approximation of how much your house is worth and can be helpful when you are looking to get a quote on how much equity you can release from your home.
Who are Equity Release Works?
Here at Equity Release Works, we have friendly financial advisers on hand to assist you with releasing equity from your home. Our experienced team provide a free, initial assessment which is entirely no-obligation. This assessment will assist you in understanding whether equity release is in your best financial interests… and if it is not, we’ll tell you for free.
To get started with Equity Release Works, simply call us on 0800 368 8214 or fill in our equity release enquiry form and one of our equity release advisers will give you a call back for your free initial assessment.