Frequently Asked Questions

To qualify for this type of equity release scheme, the youngest homeowner must be 55 years or older and resident in the UK. The property must be your main residence, also in the UK, and with a minimum valuation of £70,000. It must also meet the lenders underwriting criteria, such as property type & construction.
Note - different lenders have different criteria. Thus speak to our independent advisers on 0800 028 1772 to help clarify eligibility.

A lifetime mortgage is a suite of different types of equity release schemes incorporating Drawdown, Enhanced, Interest Only and Voluntary Payment Plans. The drawdown plans differ as rather than taking the whole release of equity in one lump sum, they can be taken gradually over time. As you are only charged interest on the amount actually withdrawn, the remainder still held by the lender is not, thus you will save much interest over the long term by taking only what you need.

The maximum equity release possible is based on certain criteria, personal to you. Firstly, the age of the youngest homeowner will be taken into account, which must be over the minimum of 55. Next the property value will need to be included in the equity release calculation as the maximum percentage released is based on this figure. Finally if their is any poor health with the youngest homeowner, then certain enhanced lifetime mortgage companies will take this into consideration when assessing the maximum lump sum.

There are several key features of a drawdown lifetime mortgage that make it attractive to homeowners. The key benefits relate to flexibility, cost savings and security. First, you are able to have money set aside in case you need it but you are not required to pay any interest on that money being saved in the cash reserve facility. So, not only do you have access to additional funds but you also do not have to pay interest on it. In addition, this product allows for a good deal of flexibility as you can withdraw funds from the facility whenever you need to and it is usually received in just 14 days.

There are several benefits to a drawdown lifetime mortgage. You can save a good amount of money on this product when compared to standard lifetime mortgages as these often have lower interest rates. You also only ever may the interest on the actual amount you withdraw and not the amount set aside in the cash reserve facility. That money is received quickly, usually in 14 days, and you are able to withdraw as little as £2,000 at a time. You have the flexibility to withdraw funds whenever you need extra money but are not required to pay any interest on that money set aside. You keep 100% of the ownership of your property.

You should expect to pay the standard set up costs for the product. However, you will not have to pay any additional charge when you draw from the cash facility. This means you will not incur any legal, advice, or valuation fee when taking money from the cash reserve facility. You also do not pay any interest on the money being held in the facility. This product can be cost-saving for these reasons.

Generally speaking, you would be able to borrow more using a lump sum plan. This is because lump sum plans tend to come with higher maximum LTV’s. Because there are costs associated with holding funds for the homeowner, providers typically offer lower maximum LTV’s with a drawdown scheme. That said, you should always find out if you are eligible for an enhanced product which may offer a higher maximum. Enhanced products are typically available to homeowners who either have chronic health conditions or lead a particularly unhealthy lifestyle.

The equity release companies offering drawdown lifetime mortgages are as follows:

• Legal and General: offers several products with different features and interest rates

• More2life: Offers a couple of different products including an enhanced version.

• Pure Retirement: Offers two different version of their drawdown plan

• Aviva: Offers one flexible drawdown scheme

• Retirement Advantage: Offers several different drawdown schemes, each with different interest rates and LTV’s.

• Just Retirement: Offers one drawdown scheme

• LV= Offers one plan with several security features available

The lender initially calculates the initial cash reserve facility based on the youngest homeowner’s age. Once the amount in the drawdown facility is decided upon, you can choose how much tax-free cash you want to take out. Any remaining funds after that is held by the provider in the cash reserve facility. The amount that you withdraw from your cash facility is really up to you and your needs. You essentially manage the drawdown facility. Drawdowns will incur the interest rate at the time that you withdraw the funds, which may be a different rate than what you incurred at the outset of your loan.

Overall, the cash reserve facility is not guaranteed and can be withdrawn. The only exception to this is with the drawdown lifetime mortgage provided by LV= which takes other factors in consideration. With this product, withdrawals can be made any time you want until the maximum amount available has been exhausted, or 15 years from the date set at the loan outset. With all products, it is important to remember that withdrawals from the drawdown facility will incur the interest rate that is applicable at the time of the withdrawal. That rate may be different than the rate applied at loan outset.

You may still have options available to you once you withdraw your full reserve facility but they are not guaranteed. You would have to go back to your lender to have them reassess if you’d be eligible to borrow anything else. To determine that, the lender will take into account your current age, the value of your property, and your outstanding balance. If you are eligible for additional funds, you’ll be able to borrow more. If not, you may still be able to look into remortgaging with another lender.

The absolute minimum available is just £1,000. However, most lenders have a minimum drawdown amount of at least £2,000, with some having a minimum of £5,000. The interest on the amount taken will be that which applies at the time of the withdrawal.

This is one of the most attractive features of a drawdown lifetime mortgage. The withdrawal from the facility will not cost you anything with any lender. So, you are able to set aside these funds without incurring interest on it and you can withdraw from it without incurring any charge.