Drawdown Schemes

Drawdown Lifetime Mortgages are a welcome innovation to the equity release market & are now the most popular method of releasing equity. Their prominence has also been assisted by the fact that interest rates have now become much more competitive.

Summary

Drawdown schemes are based on the principle of ‘roll-up’.
However, rather than taking funds in a single withdrawal, drawdown enables you to take it in stages.
This is achieved by the creation of a reserve facility, which holds additional funds for future use.


In addition to the above features, drawdown plans have the following advantages/disadvantages: -


Advantages
Interest is only charged on the cash released.Less interest will potentially be charged over the long termPotentially more inheritance will be available for your beneficiariesAd-hoc withdrawals can be made, as & when funds are requiredCan assist in mitigating against loss of mean-tested benefits

Disadvantages

There may be a limitation on the size of the initial lump sumSome reserve facilities may not be guaranteed & can be withdrawn by the lenderFuture withdrawals can be at a higher interest rate than the original lump sum  The size of the reserve facility maybe restricted


 

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