Lifetime Drawdown Mortgages
Equity Release Plans have been continually developed over the last decade. All of the Providers of Equity Release Schemes are constantly trying to improve the plans available to Clients.
Drawdown Lifetime Equity Release Schemes have been available for 7 years and have proved to be by far the best improvement in the flexibility of lending since Equity Release started. Under a Drawdown Lifetime plan your maximum loan is worked out based on your age and the valuation of your property.
Lifetime Drawdown Mortgage Scenario
You are eligible to borrow a total of £60,000 but you only £30,000 for your immediate use. If you were to borrow the full £60,000 you would have to find somewhere to invest the remaining £30, 000 at a higher rate of interest than you are paying under your equity release scheme i.e £30,000 borrowed at 6.6% would require you to invest it at a minimum of 6.6% just to break even.
With a Drawdown lifetime plan you can choose to leave the extra £30,000 which has been pre-approved for you to borrow at any stage in the future. The £30,000 does not have any interest charged or any charges added, it is just a further facility which is available generally at any time.
There are generally no restrictions imposed on when you borrow further funds.
You can normally borrow any further funds at your request. As the further funds have been pre-approved, they normally have no further charges, no solicitors’ fees, application fees or valuation fees.
All Lenders have different further lending criteria but normally the minimum further loan amount is either £2,000 or £5,000 and usually takes approximately 2 weeks for the money to be deposited in your bank, charge free.
The main benefit of the Drawdown Lifetime scheme is by borrowing a much smaller loan initially and then smaller loans throughout your lifetime, interest is only charged on the money borrowed from the date it is loaned to you.
This has no affect of greatly reducing the amount of interest which is accumulated at the repayment date. Also as the amount you owe in the future will be lower this may enable you to borrow further funds in the future.
When you have reached the end of your Drawdown facility you may be able to have it increased.
It will be based on the future value of your home and your new age at the time of application, less your current balance. As you will owe less money at this point because of the way the interest is added, there will be a greater chance of a new facility than if you had chosen a maximum loan at the outset.