If you are looking for a flexible approach to equity release, a drawdown lifetime mortgage may be just what you are looking for. A drawdown lifetime mortgage allows you to determine when and how you will take the money received from an equity release scheme. You will be provided with a cash reserve facility from which you are allowed to make an initial withdrawal of your choice. The remaining amount is held in the reserve facility for future needs. The principle of the drawdown equity release is based upon the fact that you would only withdraw money from your cash reserve only and if you are really in need of it.
The drawdown lifetime mortgage is popular because it offer flexibility and allows for saving. It also saves you from paying a lot of interest. The smaller your initial withdrawal, the less interest you will be required to pay. This means that you will always have funds for a rainy day or for your children upon your passing away.
Other advantages of the drawdown lifetime mortgage include: the fact that you are allowed to make withdrawal whenever needed, lower interest rates, interest is paid only on the actual amount withdrawn and not on the amount that is in the reserve facility, you remain owner of your property during the duration of the mortgage.
As with almost any other type of mortgages, the drawdown lifetime mortgage does have its disadvantages. These include the fact that the reserve facility cannot be guaranteed forever. In most cases, the guarantee is only for a certain number of years. The current interest rate is applicable to future withdrawals so there is no fixed interest rate. If you have used up all of the money from the reserve facility, you will have to re-apply for more. The lifetime mortgage provider has the right to withdraw all of the money in the reserve facility in bad economic conditions.
A drawdown lifetime mortgage will impact your life as well as the life of your children greatly which is why you need to obtain advice from an independent adviser before making a decision.