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Drawdown Lifetime Mortgage

Roll-up: Drawdown

This is another variation on a Lifetime Mortgage Plan.

How does a roll-up drawndown lifetime mortgage plan work?

Instead of your having to take a single cash lump sum initially and then having to make additional applications for further advances, a drawdown plan allows you to receive a series of smaller cash lump sums. With a drawdown plan, the lender agrees the maximum amount you can borrow. You can take a smaller initial cash lump sum and then have a cash facility to withdraw amounts when you need them up to a pre-agreed limit.

Why should I draw down?

The amounts drawn down are secured on your home and with interest are
repayable from your estate. Interest is only charged on the money you have drawn down. This means that as the loan is smaller in the earlier years, the total interest added to the loan is less than if you took the full amount initially. It doesn’t make sense to withdraw all the money immediately and have interest charged on it if you don’t need it all at the time.

Susan’s Drawdown Lifetime Mortgage Plan

Susan is 65 and has a house worth £200,000 with no mortgage. She takes out a drawdown lifetime mortgage with an initial lump sum of £20,000 and a cash facility of £20,000 available for up to 10 years. The interest rate is 6.35% and the overall cost is 6.6% APR. The interest rate is fixed for life and added annually.

Five years later, Susan needs an additional £10,000 which she draws
down. Susan dies 10 years later. By this time the total amount borrowed is £30,000. The total loan plus interest that must be repaid is £68,868. If Susan had taken the full £30,000 ‘up front’, the total loan plus interest would have been £75,541.

If you have any questions about Lifetime Mortgage Plans call freephone 0800 077 6885 to speak with one of our specialist equity release advisers or use our equity release calculator to see how much you could raise.

*Please note that this is only an example and the value of your house could go down or not increase at the same rate. ERIC’s experts always ensure that there is a no-negative equity provision