Lump sum and drawdown

A lifetime mortgage is the most popular form of equity release, and is a way for homeowners aged 55 and over to unlock some of the value tied up in their home. 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.

Get in touch with The Equity Release Experts now on 0800 188 4812 or by requesting a callback. We’ll talk you through your options and show you just how flexible lifetime mortgages can be.

Your lifetime mortgage options

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.

You might have something specific in mind for the tax-free funds you release – such as a trip of a lifetime or a financial gift to help a loved one out. 

Drawdown lifetime mortgage 

If you decide on a drawdown lifetime mortgage, you are setting up a fund that you can access as and when you need it. After agreeing an overall amount you will receive an initial release of tax free funds, you can then take more from the amount still available when you next need it (subject to minimum amounts).

It’s often the most practical solution for homeowners who don’t need all the funds in one go. If you need £25,000 to purchase that dream new car but could actually unlock £50,000 from your home, a drawdown lifetime mortgage could be an option for you.

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

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.

Is a lump sum lifetime mortgage right for you?

For some of the customers we advise, there are several benefits of a lump sum lifetime mortgage that fit in with what they want to do with their tax-free funds. Some of these include:

  • More attractive interest rates: Some lump sum plans come with a lower interest rate, which can help to reduce the total amount that needs to be repaid at the end of the plan.

  • Fixed rates: The interest rates on both lump sum and drawdown lifetime mortgages are fixed for life. So, you’ll know for sure what you’ll owe at the end of the plan – with no nasty surprises.

  • Use it in a number of ways: The joy of a lump sum plan is that you have all your tax-free funds ready to spend in a variety of ways – from home improvements to holidays in the sun.


The benefits of a drawdown lifetime mortgage 

Just as a lump sum appeals to some customers, others find drawdown lifetime mortgages much more attractive. It all comes down to personal choice – and here are just some reasons why:

  • Flexibility: Don’t need all of the tax-free funds released from the value of your home in one go? You can call upon them when you need them.

  • Lower overall cost: You’ll only ever pay interest on the amount you drawdown, which means that the interest doesn't mount up as quickly so you could bring down the total cost over the lifetime of the plan.

  • Reduced impact: By taking out a drawdown lifetime mortgage you can organise drawing down funds in a way that could help reduce the effect on any means-tested benefits you receive.

Both options also share a number of benefits too. By either taking a lump sum or deciding on a drawdown option, you’ll still own your home and you’re still free to move home – providing the property you wish to move to meets the lenders criteria at that time. Typically, with both plans there are no monthly repayments.

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 consultation and expert advice you can trust.


Taking everything into account

As with any form of equity release, neither options are without their risks and things that you’ll need to think about first. You'll be given a recommendation that you can consider in your own time. Our advisers are here to make sure you know exactly what’s what if you’re thinking about releasing equity.


Lump sum lifetime mortgage

  • Higher total cost: The effect of compound interest on a lump sum plan can quickly increase the amount that you’ll owe at the end if you release all your funds at once.

  • Less flexibility: You won’t be able to access further funds through the plan we recommend unless you apply for a further advance – which isn’t guaranteed.


Drawdown lifetime mortgage

  • Higher interest rates: As the initial amount of funds you release through a drawdown plan is lower than a lump sum, you may find that your interest rate is higher in comparison.

  • No guarantees: Drawdowns are not guaranteed and the lender may withdraw this option. But you won’t pay interest on the funds you’re yet to access.

  • Further drawdowns: The interest rate applied to drawdowns will be the interest rate at the time of the drawdown which could be higher or lower than your initial interest rate.


Taking the next steps

If you want to find out more about lifetime mortgages, call on 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.

You can call 0800 188 4812 or request a callback to arrange a free initial consultation today.


Things to consider with lifetime mortgages

  • A lifetime mortgage is a loan secured against your home.

  • Typically with a lifetime mortgage there are no monthly repayments to make as the loan plus roll up interest is repaid when the plan comes to an end.

  • Equity release will reduce the value of your estate and may affect your entitlement to means tested benefits.

  • Unless you decide to go ahead with a plan, our service is completely free of charge, as our fixed advice fee of £1,499 is only payable on completion of a plan.