Equity release plans are become more varied and flexible – but has a product been developed which allows customers to drawdown their money over time? Mark Gregory explains more…
The Question
I’d like to take out equity release to help top up my pension during my retirement. I believe there is a type of equity release product which will allow me to ‘drawdown’ money in stages and I am interested in finding out more.
What options are available and how frequently can I draw down the cash? Will the interest rate be higher on this type of product?
Mark’s Answer
Thank you for your question and I can confirm that the basic eligibility for a Lifetime mortgage is that you must be at least 55 years of age, and your property must be worth at least £70,000. Any mortgage on your home must be replaced or repaid on the completion of your application.
Assuming you are eligible, the flexible Lifetime mortgage with the option to borrow an initial lump sum and drawdown further capital in the future is a consideration for you. At this stage of your research, you have a couple of options to enhance your understanding and obtain personalised details.
Firstly, you could call one of our expert, whole-of-market advisers, and after asking you a few basic eligibility questions, they can provide you with explicit details of what may be available for you. Our advisers can be contacted by telephoning 0800 802 1051 or via our free Livechat facility on our website.
Alternatively, you could use the personalised smartER research facility on our website and complete your own sourcing and you will be provided with information of what is available for you including live interest rates, an initial lump sum and a drawdown reserve facility to provide you with financial freedom.
As noted above, you may be entitled to a tax-free lump sum which would have a fixed rate of interest and any subsequent withdrawals from the drawdown reserve facility will be the prevailing fixed interest rate at that time which could be higher or lower depending on market conditions.
Some providers will allocate a drawdown facility that does not affect the initial fixed interest rate, and other providers will increase the interest rate for enhancing the drawdown facility.
Taken directly from a Key-facts illustration that can be provided for you, I can confirm one provider has stated: ‘You may be able to borrow up to the amount of your drawdown facility at any time, in minimum amounts of £1,000, please note that the drawdown facility is not guaranteed and can be withdrawn in certain circumstances.
‘The interest rate charged for the drawdown capital will be a fixed interest rate for the life of the lifetime mortgage and could be higher or lower than the interest rate on the original borrowing.’
The provider confirms that they will tell you what the new fixed interest rate will be each time you apply for capital from your drawdown facility, and it will be confirmed in each offer of loan, together with the Annual Percentage Rate (APR).
Withdrawal timescales can vary between lenders. However the majority do allow ad-hoc withdrawals as frequently as you wish, and can be as low as £500 a time.
As noted, we are whole-of-market advisers here at Equity Release Supermarket, so we will research all providers on your behalf, which will allow you to make an informed decision about your options to support your long and happy retirement.
Meet our expert…
Mark Gregory, founder and CEO of Equity Release Supermarket, is here to answer your questions. Mark is an adviser himself with over 20 years equity release experience.
He launched Equity Release Supermarket 10 years ago and it has grown to become one of the UK’s leading equity release specialists.
Email kate.saines@emap.com to ask Mark a question
