Lump sum vs drawdown lifetime mortgage

Understand your options when it comes to unlocking tax-free funds from your home.

Scroll down

What is a lifetime mortgage?

A lifetime mortgage is a loan secured against your home and is a way for homeowners aged 55 and over to unlock some of the value tied up in their home. There are typically no monthly repayments as the loan, plus compound interest, is typically repaid through the sale of the property when the last remaining applicant passes away or moves into long-term care.

But did you know that you can receive your tax-free funds in two different ways? The two forms of lifetime mortgages are a lump sum and drawdown. With our specialist advice, why not let us help you work out the approach that’s most suitable for you and your personal circumstances.

ⓘ Equity release is a lifetime commitment - check the benefits and drawbacks before going ahead.

Get in touch with The Equity Release Experts now on 0800 188 4812 or by requesting a callback. We’ll talk you through the flexible features available with a lifetime mortgage.

Your lifetime mortgage options

As with any form of equity release, neither lifetime mortgage option is without their risks and things that you’ll need to think about first. Our equity release advisers are here to make sure you know exactly what’s what if you’re thinking about releasing equity.

Lump sum lifetime mortgage

With a lump sum lifetime mortgage, there really is no mystery to it. When you choose to unlock some of the value of your home with a lump sum lifetime mortgage, you’ll receive your funds in one lump sum.


  • They typically come with a lower interest rate than a drawdown lifetime mortgage, which can help reduce your total cost of borrowing

  • Your interest rate is fixed for the life of your plan, whereas any future release with a drawdown lifetime mortgage is subject to the prevailing interest rate at the time 

  • As compound interest will be rolled up on what you release, you could owe more if you release all your funds in one go and will limit your future borrowing options

  • You can’t release further funds unless you apply for a further advance – this is subject to the lender’s criteria, your age and your property’s value at the time of application


Drawdown lifetime mortgage 

If you decide on a drawdown lifetime mortgage, you agree an overall amount you can access. You'll receive an initial lump sum of tax free funds, after which you can take more from the amount still available when you next need it (subject to minimum amounts).


  • It offers more freedom than a lump sum plan, allowing you to release money when you need it
  • You can potentially save in interest over the lifetime of your plan, as the interest only accrues on the money you’ve released


  • Your lender may have the option to withdraw your additional drawdown facility
  • If you choose to make a drawdown, the funds will be subject to the prevailing, fixed interest rate at the time. This may be higher or lower than your original interest rate

Why not use our equity release calculator to see what you could unlock?

How could a drawdown lifetime mortgage reduce my cost of borrowing?

As you only pay interest on the funds you release, you could potentially save thousands over the course of your plan with a drawdown lifetime mortgage.

Illustrative example
This example is for illustrative purposes only and shows there are two customers who both have access to a lifetime mortgage facility of £81,703 at an interest rate of 6.74% MER (Monthly Equivalent Rate) (future drawdowns will be charged at the prevailing interest rate).

Customer A
Customer A takes all their cash in one go through a lump sum lifetime mortgage, so interest is charged on the full release amount from day one.

Customer B
Customer B takes an initial loan of £51,703, so interest is only charged on this lower release amount. They then make two further £15,000 drawdowns over time, taking their total release to £81,703.

Customer B saves £32,851 in interest charges
While Customer B still borrows the same £81,703 over 15 years, because they take their money in stages, their total cost of borrowing is lower as interest is only charged when they release their funds. As a result, Customer B saves almost £32,851 in interest charges over the total life of their plan. This example is over 15 years but it could be longer or shorter.

Lifetime mortgage benefits

Your specialist equity release adviser will explain:

  • You can unlock cash from your home, tax-free, to help meet your needs in later life
  • You’ll always retain full ownership of your home and can stay in it for as long as you wish
  • You can choose to make reduced or no monthly repayments to suit your circumstances
  • You’ll never owe more than your home’s worth
  • You may be able to remortgage your plan in the future to release further funds or secure a better interest rate, although this isn’t guaranteed and may be subject to early repayment charges

Lifetime mortgage drawbacks

Your equity release adviser will also outline the following important things to think about:

  • A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly
  • Equity release will reduce your financial options in the future
  • Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits
  • Equity release may leave you with limited or no property equity remaining
  • A lifetime mortgage is a long-term financial product and is not designed to be fully repaid until the death or entry into long-term care of the last remaining borrower, otherwise early repayment charges may apply

Your other options

Before deciding on equity release, it's important you're aware of some of your other later life finance options, which may include:

Retirement interest-only mortgage
Retirement repayment mortgage
Or see if equity release is right for you

Equity release costs

Knowing the costs associated with equity release and how to help manage them is important.

Compound interest explained

How to release equity from your home

Take your first step in finding out if equity release is the right option for you


Our free, easy-to-use equity release calculator lets you compare plans from across the whole market
Start here


Your free equity release guide gives you all the facts you need to make the decision that’s right for you
Request your guide

Helping you make the right choice

Here at The Equity Release Experts, we help you make a choice that’s right for you. We understand that each one of our customers is different, and so are their current situations and future aims. And it means our advice is tailored accordingly to make sure equity release works for you.

We'll compare plans from across the market. Unless you decide to go ahead with a plan, our service is completely free of charge, as our fixed advice fee of £1,799 is only payable on completion of a plan.

If you’re not sure if a lump sum or drawdown plan is right for you, talk to one of our expert equity release advisers – call 0800 188 4812 or request a callback for a free initial consultation and expert advice you can trust. If equity release isn't right for you, then we'll tell you. 

Taking the next steps

If you want to find out more about lifetime mortgages, call on our expert equity release advice you can trust – and make the decision that’s right for you. You can use our equity release calculator to see just how much you could access – or download our free guide to find out more about your options.